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Ray Boulger: FSA is biggest threat to mortgage market


John Charcol senior technical manager Ray Boulger says the FSA is the biggest threat to the mortgage market.

Boulger’s claim follows the release of Council of Mortgage Lenders research which shows 3.8m mortgages – or 51 per cent of loan applications – would not have been granted if the regulator’s Mortgage Market Review had been in place between the second quarter of 2005 and the first quarter of 2009.

Boulger says: “I actually think the biggest threat to the mortgage market over the next year is not the lack of mortgage lending – it is not even the lack of consumer confidence – it is the FSA.”

Boulger has also called for the Government to step in. He says: “I’m surprised the Government hasn’t taken more of a stand on this. If the FSA proposals go through, it will have a big impact on house prices. And if we had a substantial fall in house prices, you would then need, in all probability, a second bank bailout. And you could stop all of that by sensible regulation.”

Emba group sales and marketing director Mike Fitzgerald believes the measures will lead to a “lost generation” of mortgage clients.

He says: “The CML research just shows you that if the MMR comes in its current format, there is going to be a dead 10 years, we’ll have a lost generation of mortgage clients. I don’t think they have got any appreciation about the impact of their rules.”

“It is a social right to be able to own your own home – you are denying them that right with these proposals.”

The Association of Mortgage Intermediaries and the Building Societies Association have also expressed concern about the MMR.

AMI director Robert Sinclair says: “The regulators apparent aversion to a type of borrowing that has served many consumers very well appears predetermined rather than driven by rationale. When they are delivered on an advised basis and with a robust assessment of appropriateness for the customer, there is an appropriate place and use for interest only mortgages.”

BSA head of mortgage policy Paul Broadhead says: “There is a real danger that the FSA could introduce over-burdensome regulation that will stifle this market and affect many existing borrowers –  including many for whom this is a suitable option.”


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There are 34 comments at the moment, we would love to hear your opinion too.

  1. michael rogerson 5th October 2010 at 2:39 pm

    tell us something we dont know Ray!
    good to see you guys kicking some arse!
    keep up the good work and see you soon
    rgds michael

  2. The price of UK property is ludicrously inflated. Rather than focus on loan to value caps, the FSA is actually being very sensible and looking at the borrower’s repayment ability. This must be helpful for both banks looking to be more cautious and borrowers looking to be more restrained.

  3. hail hail, shoot them all and be done with them.

  4. William Holliday 5th October 2010 at 2:51 pm

    I couldn’t agree more – if you think about it we have had more crises since 29th April 1988 than before.

  5. I’m not a mortgage broker, though I guess it all comes down to just how robust is the assessment of appropriateness of an interest-only mortgage with no repayment vehicle in place to which Robert Sinclair refers.

    With the outlook for interest rates being nowhere but upwards, it seems very risky to borrow to the absolute limit of affordability on an interest-only basis. Sooner or later, that borrowed capital is going to have to be repaid and there’s no way that house prices, in the foreseeable future, are going to rise the way they did during the nineties. Will they ever? If prices stagnate, interest-only borrowers could find that after ten years of an interest-only mortgage, they still have no equity in their property ~ they might as well have rented, with no responsibility for maintenance and repairs.

    House prices relative to earnings are still far too high and it might be argued that the only way we’re ever going to get back to a sustainable historic norm is for the market to go through the pain of a severe prices correction. It just needs to be managed with consultation, care and consideration ~ not qualities for which the FSA is exactly noted, I think we can all agree.

    Maybe a better strategy would be to stipulate that mortgages may be interest-only for no longer than the first year, perhaps two at most, but thereafter the borrower must start to make capital repayments as well. Just an idea.

  6. Enough is enough!!

    It really has reached the point where the Financial Services Authority needs to be taken to task and dimantled before it does any more harm. The financial services industry needs to unite and speak with one clear voice. Contact your MP now.

  7. Steven Farrall (Adviser Alliance) 5th October 2010 at 3:18 pm

    Quite frankly what do you expect from the FSA? They’ve failed, utterly (and predictably). They need to shift the blame for the banking crisis onto anyone anything but them. Consequently they used a flawed and self justificatory analysis to come to conclusions favouring more (failed) regulation.

    The prime reasons for the explosion in lending that drove the real estate asset bubble crisis and consequential banking crisis were the flawed fiscal, monetary and economic policies of incompetent politicians and their lackey central banks and unaccountable regulatory quangos. (Aided, I freely admit, by a venal and irresponsible banking sector. But this was a rational response to a venal and irresponsible Government)

    This unholy trinity weaked bank capital ratios, permitting fractionally reserved banks to create ever more credit. Allowed the overall money supply to explode and keept interest rates too low for too long. All this funny money at the wrong price had to go somewhere.

    The answer to the bad mortage lending problem is therefore to get the state out of the money and interest business altogether, and if you must permit fractional reserve banking, make the banks hold higher capital ratios and adopt Douglas Carswell’s reforms on the ownership of bank deposits.

    All of the foregoing hints very strongly that the FSA should be scrapped. Do you seriously think that they are going to vote for that? No, neither do I.

  8. Ray the FSA is the biggest threat to the every market.

  9. As a specialist in the First Time Buyer market it concerns me greatly what the FSA are intending to do. A mortgage is part of a holistic financial plan. With up to 25 – 30 years to repay, there is plenty of time to change from interest only to repayment, whether it be in one go or in stages. I always recommend to FTB’s who opt to go interest only initially, that they utilise the overpayment element of a mortgage deal to get use to paying a higher amount, but have the flexibility of reducing their outgoings if necessary.

  10. The mortgage and housing market will never recover until the FSA is dead in the water. All they look for is reasons to make the market more difficult to trade in, while they draw their fat cat salaries and bonuses. The problem is that it will not be broken up until 2012, and in that time they can do an awful lot of damage.

  11. That took a long time to come!!! Not further regulations BUT as they are with stringent income requirements are slowing down the market.They need to allow self certification as 47% mortgages were those a few years back!
    In London their requirements will just ensure properties over a million are not sold and bought except for cash!!! The Govt needs to be told NOW to wake up!!! The FSA will not tell them the damage being done in the name of prudence!
    Mr Gordon Brown was always prudent? and where did he leave us?

  12. Ray is finding out the levels of adviser detriment that IFAs have been shouldering for some time.

    The economic crisis was not born of UK lending being out of control, it was a ricochet caused by the madness of US non-conforming lending by unregulated and unsupervised salesmen.

    The UK market has been sound and profitable for all aprties and the use of self-certification enabled many good borrowers to move house or remortgage.

    With the removal of self-cert and the erosion of interest only loans the FSA will be responsible for a 20% fall in house prices, consumer detriment as a result and a marked reduction in consumer confidence.

    Allied to the RDR debacle they will create more consumer grief than Northern Rock, Bear Sterns, lehmans and the rest did in combination.

  13. Spot on Ray.

  14. So, the old game of ‘blame the FSA’. ‘What have the Romans ever done for us, etc etc..’

    Personally I think that Ray has a rather obvious self interest in this matter. Mortgage brokers generally get paid a % of the property price, so why would Ray not want the whole rotten, unsustainable edifice that is the mortgage market of the recent past not to continue?

    House prices must be affordable. Period. Are house prices currently affordable to most first time buyers? No, they are not. So, how do we as an industry pretend that a buyer can afford something he can’t? Easy, we do interest only mortgages (renting off the building society), we do Liar loans, etc etc….. all of which keeps house prices artificially high.

    Does anyone think that this state of affairs is in any way sustainable?

  15. Paul @ 4.50pm.

    Say your comments to Ray’s face rather than under the cloak of cheap anonymity. If you had ever spoken to, met or had any experience of the amount of work Ray has put into this industry then you would know that your comments are completely baseless and you should be ashamed of them.

  16. Has regulation failed?

    I’ve been looking back to the future again, all the evidence suggests that as soon as the regulator gets involved the target market collapses, is that the plan? If so, whose plan is it? Murphy’s?

  17. I’ve never met Ray and think he has many sensible things to say but this isn’t one of them. The FSA are a soft target and while a ban on interest only is unhealthy and unlikely there are other parts of the MMR that will hurt lenders much more than brokers and I believe are more likely to strenthen our role in the distribution chain rather than weaken it. Obviously nobody knows what will unfold but I think its healthy there are other opinions than Ray Boulgers.

  18. Scarlet Pimpernel 11th October 2010 at 12:30 pm

    I agree with you Mr Ray; but how would the FSA and all their HANGERS ON! with their BIG FAT SALARIES survive?
    When the new regulatory system kicks in all the FSA – HANGERS ON! Will move into the New system! We will never get rid of the B####s

  19. Scarlet Pimpernel 11th October 2010 at 12:55 pm

    It’s the Credit Card problem – Not the Mortgage problem!
    This is how STUPID! The FSA’s logic is! They insist the when someone want’s to Save; the Adviser completing the work has to write chapter and vers – Normally 5 to 10 pages of a ‘Suitability Letter’ and this is just for saving.
    But to get into Debt with a Credit Card it was only on one simple application form & then you could get into as much debt as possible.
    People are encouraged to get into debt. It is not the mortgage problem. It’s the Credit Card problem.

  20. The donkeys at the FSA have no idea what danage they are doing. If Ray Boulger says they’re incompetent then they must be. He’s not the best industry spokesman for nothing you know! I just hope theres a military coup some time soon, sack all the donkeys and government and let the markets thrive once again. Simples

  21. Human nature versus common sense…. Like Carol Brown who commented earlier, I have always discussed interest only and capital and interest mortgages and the pros and cons of both. I think I’ve only ever done less than 5 endowment linked mortgages in 12 years…
    Where the lender offers the options of overpayment, like the lady who posted, common sense actually dictates that it is better to get the mortgage agreed on an interest only basis and make overpayments at the rate needed for the repayment mortgage as that way if affordability later becomes a problem, payments can be reduced WITHOUT getting in to arrears. The vast majority of mortgages I have arranged for fiurst time buyers have been fixed rates due to the risk to affordability of rate rises and as aresult, the overpayment required is constant until the end of the fixed rate at which time a review would be needed anyway with the client to discuss future rates and the overpayments could be adjusted accordingley. I have rarley remortgaged clients as invariably the lender I chose first time round has offered a competetive package for remaining with them and by charging a nominal fee for the advice (and not admin of a remortgage) I could cover my work and the risk/PII for the advice.
    Unfortunately human nature means that if interest only with overpyament is chosen, some people will often then drop back down the overpayments to interest only for other reasons. This does put us as advisers in a difficult position, but as advisers, if we Know our Client (KYC) our advice should differ depending upon what we think our client is likely to do and we should proetcet them from themselves by reccomending C&I if we believe them not disciplined enough for inetrest only with overpayemnt, but we have no right to stop them from choosing interest only with overpayment (I am not part of the nanny state that Gordon Brown and the FSA have been building).
    As with most things the FSA and a nanny state does, they go from one extreme to another instead of looking at a smoother solution which might be something more focused on allowing periodic capital payment holidays.
    Ultimately however, we are supposed to live in a free society where someone can choose their priorities, which may be to live in and own the biggest hosue they can, even if it means no capital is repaid in the term and then downsize when they no longer need that size house. I know renting woudl achieve this too, but people in the UK do prefer to own rather than rent. Brokers do however need to argue against a course of action i.e. house purchase when renting may be more when it for the individual due to frequent moves or job mobility requirements. It is easier to do so when one is an IFA rather than an independant mortagge broker only focused on proeprty only, especially if working on a fee based system (not I say fee based as we are happy to be paid by commission, but by charging for our skills, we can charge for telling someone NOT to do something too)
    Oh and for teh record I am more inclined to agree with Ray Boulger and think the person who attacked him from behind a cloak of annonymity is scum, unlike the otehr gentleman who disagreed with Ray, but stood by his own comments, for which I respect his opinion.
    These rules try to lead the horse to water and then drown it while trying to make it drink…. I do not believe in animal cruelty

  22. I actually agree with the FSA on this one and I am a first time buyer priced out the market.

    It is not too restrictive mortgaging that is hampering the market but too high house prices. It was interest only loans and self certs (aka liar loans) that created this giant housing bubble and caused the trouble. BBCs Panorama exposed the mass problem back in 2003 and yet no one acted. Now they finally are the vested interests are trying to deflect the blame away from themselves to the regulators.

    Responsible lending is what we need and if that means house price falls so much the better.

    Remember it is prudent savers who are taking the hit from low interest rates rather than reckless borrowers. Surely it is time to stop being reckless and lend sensibly so future generations can get on the housing market. Well done FSA.

  23. Bogdan Stefanski 6th November 2010 at 5:14 pm

    House prices are far too expensive in the UK. They have to come down. get over it!

  24. Housing Market Dependent Economy 6th November 2010 at 6:08 pm

    If these regulations were in place in the first place, we would not have had to bail out any banks as the feckless and greedy couldnt have borrowed beyond their means. Now you are saying that we should prevent regulation to keep the feckless and greedy in their homes, and enable yet another generation to borrow beyond their means. Sheer insanity.

    House prices need to come down to something around 3-4x average income, the speculation needs to stop, and we need to live within our means. I wholeheartedly agree with these proposals, as, if they are not implemented, what are all the spending cuts for? Do we want another recession due to people doing part-buy, part-rent on new build shoeboxes at 10x salary?

  25. How many people do you know who in 2006- 2007 took out 100% mortgages. got the mortgage with telling lies of there earnings just to get on the ladder. I know a few and they are having hard times skint every month.There earnings were never checked. One couple have just gone bankrupt. Its time house prices came down to affordable levels so no one has to lie.

  26. “Boulger’s claim follows the release of Council of Mortgage Lenders research which shows 3.8m mortgages – or 51 per cent of loan applications – would not have been granted if the regulator’s Mortgage Market Review had been in place between the second quarter of 2005 and the first quarter of 2009”

    I think this should be re-worded…

    “… research which shows house prices wouldn’t be overinflated, we would have avoided blowing up the financial system and the recession could have been avoided if the regulator’s Mortgage Market Review had been in place between the second quarter of 2005 and the first quarter of 2009”

  27. The FSA is spot and the changes can’t come fast enough. We need a healthy mortgage and housing market, that can only come about with a return to responsible lending and a major reduction in house prices to affordable levels. When will the penny drop. The house price party could never go on for ever, those with a vested interested in the industry should stop bleating and adjust to the return to reality.

  28. Theres a lot of comments here that amount to a load of old rubbish. Too much free and easy credit is what caused the housing bubble. That bubble needs deflating. Proper controls over the extension of credit is what is needed. Lets hope thats what the FSA introduce.

  29. The Government has stepped in. They are not allowing normal economic forces to operate, which in turn keeps houses at inflated prices.
    This is one sick country that will not allow young people to buy at house, simply at fair market value. Prices are 50% too high, but don’t expect these parasites to admit to that.
    When is the coalition going to see sense and get interest rates up.

  30. The problem isn’t the proposed MMR being bought in but the fact it wasn’t done before all these fraudelent loans were advised upon and given without proper checks.

    A lot of this crisis was caused by advisors in your industry, although none of your good selves of course, putting commision before service. Something needs to change.

  31. Maybe if the proposed regulations were in place between 2005 and 2009 we would not have had an over inflated property Market. Self cert, interest only, high loan to value and high multiples of income just further inflate prices. That lost generation will be happy they didn’t buy before the bubble burst.

  32. The FSA’s job is to protect consumers long-term, it is not to protect the banks. People like Ray Boulger seem to want to see people in debt up to the eyeballs for some perverse reason. This regulation is required to prevent consumers continuing to succumb to the ridiculous lending mis-practices of the banks that we have seen over the last ten years and which have wrecked or economy. To NOT do this would be tantamount to writing a blank cheque to the banks again and saying, “go on, screw people for ever more interest payments and hang ever more debt on them as they chase their sorry little dreams”. Yes, the FSA got caught with their pants down for not seeing this economic crisis coming but I am fully supportive of the FSA in this latest regard; people must be prevented from taking on debt beyond their reasonable means to repay it in a reasonable time and with a reasonable margin for error. If that means house prices come down, so be it. That will mean reasonable people can afford reasonable homes to live in and bring up a family. If we have to lose a bank to do that, stuff ’em.

  33. The vested interests are desperate to keep the housing bubble inflated and carrying on inflicting damage on our property obsessed economy.

  34. House prices are far too high and far too many financial “people” have been lying and cheating their way into making a living off it.

    Regulation is needed for stability. Yes there will be a hard phase whilst the world adjusts to something resembling reasonable.

    Yes those selling financial products based on property will be affected – in the short term.


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