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FSA plans would suffocate home-owning dreams for millions

05 October 2010
Written by rosalind renshaw

If the FSA’s proposals on responsible lending had been in effect from 2005, around 3.8 million perfectly sensible loans would potentially not have been granted.

The Council of Mortgage Lenders makes the point today after carrying out an impact assessment of the FSA’s Mortgage Market Review proposals.

So strongly does it feel on the subject, that the CML is sharing its findings with the FSA ahead of its formal submission to the consultation paper.

It says that in rewriting the mortgage rule book, the FSA stands to “sacrifice far too many borrowers” and does not chime with people’s aspirations to become home owners.

In its own research, the CML has particularly looked at the proposal that lenders should have to assess borrowers’ ability to pay a mortgage.

Applying the various requirements to mortgages taken out between the second quarter of 2005 and the first quarter of 2009, the CML disputes the FSA’s assertion that 17% of all mortgages would not have been granted.

The CML, however, believes the true figure is over half of all loans.

It says that the FSA’s analysis was not thorough enough and failed to take into account the impact of some of its own proposals.

The CML concedes that a large number of borrowers would have avoided difficulty had the FSA’s proposed regime been in place: its estimate is that 151,000 cases of arrears and 38,000 cases of possession might not have occurred, as the applicants would not have obtained their mortgage.

“But under the same assumptions, 3.8 million ‘good’ loans, that have never suffered evident payment problems, would not have been granted,” says the CML.

Another key finding in its analysis is that first-time buyers would have been dealt “a massive blow”.

Meanwhile, Tesco’s plans to sell mortgages before the end of this year face a long delay because it has yet to receive approval from the FSA. Untangling the regulator’s red tape could take another 12 months.

“The FSA is just being careful. It is a new process and it is very difficult,” a Tesco spokesman said, diplomatically.

Comments

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    The FSA is right, we have had a decade of mass fraud in the property market leading to a massive housing bubble. As things tighten up prices will come down to normal levels and transactions will increase.

    • 10 October 2010 23:20 PM
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    Has it not occurred to the FSA that a lot of the borrowers who have hit problems are victims, directly or indirectly, of the banking crisis, credit crunch and ensuing downturn that they dismally failed to prevent? I wonder how many of the arrears and repossessions quoted would not have happened if they had been doing their jobs. Now they want to use undemocratic back-door credit control to do a job that they were supposed to be doing already.

    I agree with Marky B, they should simply resign as a faled organisation.

    • 05 October 2010 13:15 PM
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    Lorraine's comments are spot-on, why is this corporate greed wrt credit cards allowed to continue, this is the type of background pressure that the so-called regulators appear to turn a blind eye to. The words "could not run a ****-** in a brewery" spring to mind.

    • 05 October 2010 12:52 PM
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    I wish the FSA could read the comment written by Marky B, absolutely spot on and I guarantee 99% of brokers agree with this comment!

    • 05 October 2010 12:16 PM
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    It has been clear throughout that the vast majority of good borrowers will suffer for the minority, but the FSA's witch hunt is misconceived. It suggests that failures in the mortgage market caused the credit melt down when in fact it was an over supply of credit based on a flaw in the securitisation model. We are now seeing proof of this given that there is now an under supply of funds with a tightening of lending criteria that has the pendulum stuck in the other direction. Put simply, Sants and Turner should climb down from the ivory tower and beat a hasty retreat on the high horse and let the market recover instead of trying to find a scapegoat for their own mediocrity. If those good borrowers, in the article, were asked if they want the regulator the message would come back loud and clear. So what has happended to democracy? The majority of sane and responsible borrowers do not want to indirectly fund this mob and the industry does not wnat this regulator. What was arong with the MCCB when the industry set the rules and not a crowd of feckless and overpaid bureaucrats who are ill qualified? Any one with a brain cell could see that lending at 100% ltv with a top up was a calamity waiting to happen and yet these pontificating pettifoggers failed to see it at Northern Rock and yet we are all supposed to bow to their apparent wisdom, which is apparently what the MMR is predicated upon. If they are so knowledgeable and wise why don't they become the lender and try to work within their own rules - those who can do those who can't regulate. The mortgage market worked well for decades before this intrusive regulator started sticking its adjudant stork beak in to justify its nepotism. So it is not self-certification or interest only that needs to be banned but the FSA. In the name of God go and go now!

    How's that for being clear fair and not misleading?

    • 05 October 2010 10:17 AM
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    Responsible lending in the FSA's eyes means no lending to first time buyers.
    However no first time buyers, no house movers, more people renting.
    This means people will not improve rented property so NO DIY NO IMPROVEMENTS, THUS LESS JOBS FOR TRADES AND BUSINESS, I thought we were trying to move the economy forward.

    • 05 October 2010 09:59 AM
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    Seems to me that the FSA is concentrating their efforts in the wrong place.... People need a mortgage, they don't need credit - that's where 'responsible lending' needs to be practiced. Also - what about 'ethical charging'? Why are the banks still getting away with charging 30% to credit card borrowers when the BBR is still at 0.5%?! My mortgage (£170k) is currently 0.35% above BBR - it costs £100's less per month than my credit card (£8k) - that is sheer madness. It's credit debt that cripples people - not mortgages! I borrowed 7x my salary over 7 years ago and have never missed a beat. Thankfully my salary has increased to be able to cover my ever increasing monthly credit card debt - not my increasing mortgage payment.

    • 05 October 2010 09:33 AM
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