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.”