FSA managing director of retail markets Jon Pain has warned that caution will be quickly forgotten when the property market recovers.
At the Council of Mortgage Lenders’ conference last week, he said the apparent market correction is somewhat of “a mirage”. He highlighted some of the risky practices that could be repeated if market confidence returned too quickly without regulatory safeguards in place.
Pain said during the market peak, fast-tracked applications became the norm rather than the exception, with intermediaries alert to which lenders would not seek income verification so many treated fast track as an alternative to self-cert.
He also pointed out that non-banks’ share of mortgage lending surged to 15-20 per cent in 2008 from 2 per cent in 1998 and said this is an area where the FSA is looking to introduce more regulations.
Pain said: “Some people will say that the market has already corrected itself. That is true to a certain extent but it is also somewhat of a mirage.
“But if we are honest, we know that once the economy picks up and the market starts growing again, caution will be forgotten.”