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Housing minister warns on mortgage regulation

Housing minister Grant Shapps has warned that new rules on irresponsible mortgage lending must not be drawn too tight as they could deepen the housing downturn.

Shapps is meeting with FSA head Hector Sants next week to urge that the regulator’s review of lending practices is not so strong that it could make life even more difficult for homebuyers and potentially shut thousands out of the market.

The FSA launched a consultation into responsible lending last year with the aim of preventing a repeat of the poor lending practices seen in the housing bubble.

Speaking to the FT, Shapps said that while he does not want to see banks going back to those days of irresponsible lending, he said that it would be a mistake to “bolt the door” when the housing correction had already taken place and that the FSA should not be “micromanaging” what he believes should be a competitive market.

Shapps is going to tell Sants that the Government wants the market to be regulated but not on a “product by product” basis.

He said: “I don’t want to snuff out innovation in the mortgage market.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. The average age of a First Time Buyer in the housing market is now over 40 without parental support, according to a senior official of the Nationwide Building Society at the recent Mortgage Event conference in London. The BTL sector enjoys generous tax privileges and this is currently distorting the housing sector in favour of landlords and existing property owners who wish to enter the BTL market at the expense of FTBs. This can be seen from statistics issued by the Council of Mortgage Lenders.
    House prices in the UK need to fall dramatically in order that FTBs can afford to join the “housing ladder”. At present many of the younger generation are being forced into the rented sector or remaining with parents well into their late 30s. The growth of the BTL sector has been at the expense of the First Time Buyer market, firstly due from the removal of MIRAS in 2000 and more recently post credit crunch with the withdrawal of 100% mortgages as well as other FTB mortgage products.
    In order to achieve the dramatic fall in house prices which is needed to assist FTBs, there needs to be a “level playing field between FTBs and BTL Landlords. Currently deductible expenses incurred by BTL landlords can be offset from the rental income they receive and this includes loan interest. If HM Treasury were to reduce some of these concessions it will force a lot of private landlords to sell their properties and realise the gains that they have achieved to date. This at the same time will greatly assist HM Treasury to refill their empty coffers with CGT payments from private landlords. Hundreds of thousands of lower end properties will then stream onto the market at reduced prices giving tenants an opportunity to buy. This will help stabilise the housing market for generations to come. It is unlikely to force up rents or leave tenants out in the cold as has been suggested by some landlords in relation to this suggestion as tenants will have an opportunity to buy.
    It will reduce the value of property held by landlords as well as existing homeowners who have greatly benefited from housing inflation over the past three decades. It is also likely to redistribute wealth to a generation of FTBs at the expense of private landlords. It is also likely to assist in kick starting the UK economy as well as reduce inflation. Over time existing home owners will probably regain some of the lost equity in their property as more first time buyers are able to enter the market.
    It will also continue one of Margaret Thatcher’s main aims of achieving a nation of homeowners but this time it will be private rather than public housing that will become readily available. This topic is a generational issue as much as economic. You will find it stirs up huge emotions and it will be of interests to all ages. It is a debate that will run and run until HM Treasury resolves it!
    It is the type of financial issue in everyday life that was referred to by the Archbishop of Canterbury in his Christmas sermon. His sermon as you are aware highlighted the need for fairness in Society and he recommended that the rich should also have to shoulder some of the austerity cuts.

  2. Isn’t it odd that an elected Government minister has to in effect ask the FSA to do something!

    Who is in charge of our economy the FSA or the Government?

  3. the FSA are in charge,leave it to them and every body will be renting at sky high rentals,how affordable is that?the young people of today have no chance of getting on the housing ladder.

  4. Michael Fallas, bang on.

    Even odder is an elected Minister who seems to know what he is talking about…….Well done Mr Shapps.
    It might be worthwhile for those that think Mr Shapps is on the right track to drop him an email to let him know………..something I have never done before but a little extra support from us wont do any harm.

  5. Amazing – “to Urge….”

    erm, why don’t you just tell them.

  6. Grant Shapps, is putting on record that the FSA have gone over the top again.

    It will make no difference the FSA is not prone to listen, its function is self protection. Why else would it practice so much heavy gold plating.

    The thicker the plating the harder it is to rub off.

  7. who every is in charge the new rules should not be watered down so far to creat a new housing boom and banking bust. This is hard I know but we need these new rules to stop the house price madest of the last 30 years !!

    Not every one needs or should buy their own house – what is wrong with renting after all.

  8. The Ghost of Independence Past 31st December 2010 at 4:28 pm

    And very wise too! The FSA are quite capable of killing the patient with the medicine eg they are hell bent on doing this with their idiotic RDR. £1.7b cost to decimate the most successful and complaint free independent sector. Happy new year Hector SantoClause even if you’re not planning a prosperous one!

  9. The FSA is just an out of control quango, has been allowed to get away with murder with no concept of how the majority of this population exist. There are still millions of people for insxtance that are underinsured(in fact some have none at all) due to the demise of the home service insurers due to the costs inflicted on them by the FSA. This has no doubt also reflected on the savings gap.

  10. Brian Pettinger 2nd January 2011 at 8:27 pm

    Innovation in financial markets got us into trouble in the first place.
    Perhaps we should innovate a new minister

  11. Quite correct Michael.

    Don’t urge, warn or ask – just tell them. If they don’t like it they can become part of the 330,000 civil servants about to lose their jobs.

    Easy really.

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