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.”