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FSA lending plans a “step into the abyss”

Intermediary Mortgage Lenders Association executive chairman Peter Williams has warned the FSA’s responsible lending proposals are a “step into the abyss”.

The FSA says its responsible lending consultation paper, published today, aims to ensure all lenders get back to the basics of responsible lending to prevent future problems in the mortgage market before they can develop.

Williams (pictured), argues the regulator has taken regulation to the point where it is difficult to anticipate the future shape of the market.

He says: “While nobody would pretend that the mortgage market is perfect and that there aren’t aspects that need addressing, the FSA has taken regulation into uncharted territory with unknown consequences for the shape and effectiveness of the UK mortgage market.

“By its own admission the FSA agrees its proposals will impact upon the accessibility and cost of mortgages, though it cannot be specific. The question we have to ask is whether the FSA has gone too far, or at least not done enough to understand the impact of its proposals before airing them?

“Moreover, it has done nothing to address the big question today regarding the lack of mortgage finance; the market it plans to bequeath to us seems some considerable distance from meeting the requirements of an ‘age of aspiration’, as set out recently by the Housing Minister Grant Shapps.”

He adds: “By 2012 the UK mortgage market could be unrecognisable and with unknown consequences. This really is a step into the abyss.”

Similarly, the Council of mortgage Lenders argues that while regulatory change is inevitable, there could be unintended consequences from the FSA’s proposals.

CML director general Michael Coogan says: “The risk is that the gain will not match the pain in the short term. The industry and consumers will feel the costs of imposing new regulatory requirements now, in a market where they are not needed, but the potential consumer benefits will only be felt at some unspecified time in the future.

“We look forward to working with the FSA to ensure that a pragmatic approach to implementation can be adopted as far as possible, to reduce the negative side-effects that may arise from well-intentioned regulation.”

AMI director Robert Sinclair has warned many borrowers face being excluded from access to finance and higher costs. He says: “We are concerned the FSA has not selected the most appropriate affordability remedies to provide measured results. It is proposing to apply virtually all the alternatives, with little consideration of the cumulative impact. The costs to firms will be significant and these will have to be passed on to consumers.” 


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Here we go again – The unqualified morons at the FSA leaping into something they know nothing about. They admit there will be a big impact but dont know what that will be? Can you imagine how fast they would slap a fine on any adviser who, knowing there was going to be an impact to a client if they took our advice but we could not document what that was going to be. Please get these idoits away ASAP. They are going to kill off everything in sight that looks like a free market.

  2. Robert Donaldson 13th July 2010 at 1:01 pm

    What about credit card lending and such like. Nine times out of ten it is not the mortgage lending that is always the issue although it gets the headlines. It is the other borrowing which people do after they have taken out a mortgage which causes the problems.

    Isn’t it about time we went back to a scenario where you could not purchase an item unless you were putting down a 20% deposit. This would teach people to save for the things they wish to buy.

    I doubt whether this will happen as it would slow the economy but a reality check might not be a bad thing in the long run

  3. It is more like mad scientists loose in a laboratory. Bl***dy thoughtless shambles, rather than necesary regulation.

  4. Baby and bath water spring to mind!

  5. The FSA could not give a toss about the outcomes of its brainwaves providing they canget away with it and still draw their large salaries. On eof the things being muted is large deposits of 20% to 25%. I wonder how many people at the FSA paid these sorts of deposits when they purchased their first house. Not many i bet, but that does not matter because they have their house and mortgage. They could not give a …… about the ordinary public.

  6. wouldn’t be so bad if this had been done 15 years ago

  7. Just leave it all alone and put a min deposit on all goods of 25% and let the mortgage market find its own feet and deposit criteria. And this government came in with statements of too much red tape and lack of choice!! Stones and greenhouses

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