The total one-off cost of implementing the MMR will be between £40 and £65m, according to the FSA.
In today’s MMR consultation paper, the FSA says the industry will then face ongoing compliance costs of between £47m and £170m a year.
Broken down on a cost per proposal basis, the affordability requirements are expected to cost between £3m and £15m to implement while its interest-only rules will cost £14.7m. The ongoing costs for these proposals are £7.1m-£10.3m and £4.8m-£14.3m respectively.
The regulator’s proposals on arrears charges will have “minimal” one-off and ongoing costs but the distribution and disclosure requirements will cost between £22m and £33m to implement, with ongoing costs of £2m a year.
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 impact 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 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.
It also estimates the net per borrower benefit from the responsible lending requirements will be about £330.