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Mortgage pitfalls

Restrictions on mortgage products could be the nail in the coffin for struggling brokers.

Last week’s Turner review did not rule out future product restrictions such as limiting loan to value ratios below 100 per cent and capping income multiples to three times, although it did say that such ideas were “premature”.

The review says: “The introduction of product regulations limiting mortgages merits consideration.”

But brokers warn that restrictions would have dire consequences for homeowners and intermediaries.

Money Workout managing director Matt Andrews says: “Any restrictions would spell the death of the mortgage intermediary.” He says it is already very challenging to place mortgage deals, with lenders’ criteria so strict and says brokers will not be able to cope with the additional limitations on their business.

Quantum Mortgages director Fahim Antoniades believes it is a good thing that the FSA will be more intrusive in its supervision of banks. He argues that, with this degree of oversight, the regulator may reduce the need for such restrictive measures.

He says: “Let us let the FSA go in and investigate the banks before deciding on any mortgage restrictions and we might find that caps will not be necessary after all.”

The FSA plans to publish a paper on product regulation in September.

John Charcol senior technical manager Ray Boulger says: “Once this has been issued, it will up to the mortgage industry to respond in a robust manner to convince the FSA that mortgage caps are a thoroughly bad idea.”

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