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FSA’s Turner highlights complexities in mortgage product regulation

FSA chairman Lord Adair Turner today highlighted the complexities of product regulation in the mortgage market in a speech at the FSA mortgage conference.

Turner said a key consideration of product regulation is between loan to value and loan to income limits, but added that the regulator is currently unsure whether any limits would be appropriate.

He said the FSA’s analysis of the mortgage market was highlighting a “very complex situation”, in which the FSA had to take account of short term trends as well as designing the appropriate long-term policy.

Turner added that careful thought has to be given to the choice between product specific regulation, sales regulation and firm level regulation.

The FSA will publish its proposals for changes to mortgage regulation in a discussion paper in September.

Turner said: “What I have tried to do today is to indicate that the issue is a complex one, which requires careful consideration and further empirical analysis, running up to the FSA September Discussion Paper, and indeed subsequently, in a wide ranging debate.

“We do not need to rush to decision. We do not face today, nor are we likely to face anytime soon, the danger of irrationally exuberant behaviour by either borrowers or lenders. We have time to get it right. And getting it right is very important given the huge importance of the mortgage and housing markets, to individual households, to banks, building societies and other credits intermediaries, and to the macro economy.”

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