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Societies voice concerns over dangers from MMR

Building society chiefs expect to see a prolonged period of house prices showing little growth or slight falls, according to a Building Societies Association survey.

The BSA survey also revealed that members expect net lending to be up by 17 per cent this year, from £12bn in 2009 to £14bn and they predict lending will rise to £21bn in 2011.

BSA members do not believe the FSA’s mortgage market review will be beneficial, with most respondents claiming the drive would have “at best no impact and possibly a negative impact”.

The societies say the increased compliance cost for lenders would lead to more expensive mortgage products. They also feel there is a strong danger that innovation will be hindered and the self-employed will be excluded from the mortgage market.

Summing up, the BSA says: “The MMR causes arrears to be viewed by the regulator as customer detriment, which may result in lenders being more risk-averse and more people being excluded from the mortgage market.”

Societies are also concerned the MMR will put them at a disadvantage compared with banks by limiting the specialist activities they are able to undertake.

Respondents expect further consolidation in the building society sector, particularly if low interest rates continue for a prolonged period, creating margin pressure.

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