The Council of Mortgage Lenders has warned that the risk of negative net lending could become normal as a result of the Mortgage Market Review.
Speaking at the trade body’s future housing conference this morning, director-general Michael Coogan told the audience the regulator needs to “think again” about the MMR.
Talking about how lenders may respond to the MMR, Coogan said: “They will likely lend less, or the same, but will not increase their willingness to meet borrower demand as the economy improves.”
He adds: “Today we have a market of less than £150 billion gross lending and by most industry estimates we could have a sustainable annual market of £250 billion of responsible lending and borrowing. Net lending is less than £10 billion compared to over the £100 billion in 2007.
“The risk of negative net lending is real as we enter 2011 because of funding issues, but if the unspoken aim is to shrink mortgage debt, then this could become the norm.”
He suggested that part of the MMR might be an “insidious attempt by authorities to shrink the ‘debt mountain’ of £1.2trn by encouraging more repayment of mortgage debt than new borrowing each year”.
Coogan added that the new rules under the MMR would inhibit opportunity in the market.
He said: “The unintended consequences of new mortgage regulation are likely to stifle innovation and opportunity, whether for first-time buyers, movers, borrowers who want to access their equity, those whose personal circumstances are different to the “norm”, private investors in residential property or funders of social housing.”