Mortgage regulation to 'end age of home ownership'

The Council of Mortgage Lenders has hit out at proposals in a review of regulation of the mortgage market which it says could stop half of all current mortgages going ahead.

Michael Coogan, director general of the CML, said proposals by the Financial Services Authority to reduce the risk that any consumers will get into difficulty paying a mortgage would have a very serious impact upon house prices if implemented.

Talking at the Home Builders’ Federation’s Housing Market Intelligence conference in London today, Coogan said: “The FSA’s position is simply not good enough. The risk of a house price boom is nil. The possibility of stability is slim. The possibility of substantial falls in prices would grow significantly if these proposals are implemented.”

Coogan said the FSA Mortgage Market Review, published late last year, was fatally flawed, and would lead to the “end of a golden age of home ownership,” in the UK.

The intervention comes as the CML published mortgage lending figures showing the number of house purchase loans falling 8% between July and August this year, with the number of loans to first-time buyers in particular also down 5% to 18,300. The intervention also comes amidst further bad news for the housing market, with the RICS today reporting growing numbers of surveyors experiencing house price falls.

The FSA’s analysis of the impact of its proposed regulations, which include limiting lending to people with lower credit ratings, and effectively regulating out self-certification and interest only mortgages, finds that they would cause “significant” falls in house prices. In addition 17% of all mortgages agreed between 2005-9 would not be allowed in future.

However, Coogan said the CML had done its own analysis of the FSA’s data and found that 51% of all mortgages agreed in the last four years would be ruled out – meaning 3.8m people who had got loans would not now get them. He said: “The concept of stretching yourself to buy a home is effectively dead [if these proposals are implemented].”

The Treasury will ultimately decide how to change the regulation, with decisions not expected until after the spending review.

Stewart Baseley, executive chair of the HBF, said: “We’re now facing the threat of further FSA-inspired regulations which might make a bad situation even wrose.”