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Regulator says CML is jumping the gun over effects of MMR

The FSA has criticised the Council of Mortgage Lenders for making “premature” assumptions about how proposals in the mortgage market review will affect the industry.

Earlier this month, the CML claimed that if the MMR proposals had been in place bet-ween 2005 and 2009, a total of around 3.8 million mortgages would potentially not have been granted, equivalent to over half of the total number of mortgages advanced during that time.

The CML argued that these mortgages would not have been granted, even though borrowers had not demonstrated any payment difficulties.

But the FSA hit back at the claims in a speech at the Building Societies Association annual mortgage seminar last week.

FSA mortgage policy manager Lynda Blackwell said: “The biggest controversy has been about the impact of our proposals on the market, with the suggestion that if the affordability proposals in the paper were implemented, around half of all mortgages taken out between 2005 and 2009 – which apparently have shown no signs of payment difficulty – would not have been granted.

“Frankly, a number of assumptions about the final mortgage market review policy requirements have been made in making that assessment. We have not decided on our firm policy proposals and so it is a bit premature to be judging the outcome.”

The CML has decided not to issue a response to the regulator’s criticisms.

Blackwell went on to argue that most existing mortgages would not have been refused under MMR rules but simply granted on different terms such as the requirement for a higher deposit or higher repayment levels.

She also cited FSA analysis suggesting that 46 per cent of borrowers are under pressure due to the level of their financial commitments and outgoings in relation to their income.

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