AMI’s latest report, unveiled in this week’s Money Marketing , compares the UK mortgage market against European and US markets. It questions whether regulatory actions or inactions have had the required effect in the UK over the last five years.
The paper is intended to inform the FSA consultation on mortgage market regulation starting in the third quarter of this year.
Dr Oonagh McDonald, former MP, Treasury spokesperson and FSA director, drafted the report, which argues that the sources of problems in the US market were not replicated in the UK and that lax lending does not cause house price bubbles.
The AMI report also says that by limiting the supply of funds or the price of those funds, the regulator would only deflate prices temporarily, creating the next bubble when the supply of funds improves.
It also argues against limitations to loan to value and loan to income ratios.
AMI director Robert Sinclair says there is clear evidence that UK mortgage lending criteria is not to blame for the economic crisis.
US non-prime lending peaked at about 32 per cent of their market, while in the UK it did not get above 12 per cent of overall mortgage lending.
Sinclair says: “We urge caution before the FSA introduces unnecessary regulation that is unlikely to have the desired effect on the UK market. If the FSA and the Government wish to exert greater control over house prices, product regulation is not the answer.”
AMI has also called for further empirical research by FSA in arrears and possessions so as to determine how many are caused by unemployment, illness, divorce, other family emergencies and how many by over-borrowing.