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Imla warns that MMR will hit harder than expected

The mortgage market review will have a much bigger impact than the FSA currently expects, according to Intermediary Mortgage Lenders Association executive director Peter Williams.

Speaking at the Building Societies Association conference in Manchester last week, Williams, who is also a director at the University of Cambridge Centre for Housing and Planning Research, says the FSA has underestimated the effect MMR will have on borrowers and the market.

The FSA produced a cost-benefit analysis alongside its final MMR consultation paper last December. It estimates mortgage lending will be reduced by 2 per cent in subdued market conditions and 10 per cent in boom conditions as a result of its responsible lending rules.

It has also estimated the rules would affect 2.5 per cent of borrowers in the current market and 11.3 per cent in boom times.

The FSA says house prices could potentially grow by 34 per cent between 2014 and 2022 without the MMR and it estimates house prices will grow 23 per cent with the MMR proposals in place.

Williams said: “One concern of the MMR is that the cost-benefit analysis seriously understates its impact. I suspect the MMR will bite tighter and deeper than the FSA expects.

“The impact could be significant and the FSA will have to watch the MMR closely, as will other regulatory authorities.”

London & Country associate director of communications David Hollingworth says: “At the moment, it is difficult to predict what effect the MMR will have. But the cost-benefit analysis was published before lenders started tightening criteria, so it has not taken into account lenders implementing the MMR before the final rules are in place.”

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