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FSA review must not derail fragile mortgage market

In releasing its response to the FSA Mortgage Market Review discussion paper, AMI has called for:

* More consumers to have access to mortgage advice;
* Lenders to retain ultimate responsibility for assessing affordability;
* FSA to not restrict higher Loan To Value (LTV) and Loan To Income (LTI) mortgage products, so as to not limit equity withdrawal or apply unnecessary controls over debt consolidation;
* Procuration fees to remain as a remuneration option and the decision on remuneration to be agreed between the customer and the adviser;
* FSA to recognise the fundamental differences between fast-track and self-certification mortgages and ensure that fast-track mortgages, which are appropriate for low-risk consumers, are not banned.

Robert Sinclair, Director of AMI, said: "The vast majority of consumers have been well served by the mortgage market. We are concerned that the proposed changes, which will protect a small minority, will substantially impact on the choices of the vast majority of consumers. The regulator needs to be mindful of negative unintended consequences that regulation could have on a market still in a state of recovery."

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0 thoughts on “FSA review must not derail fragile mortgage market

  1. Peter Hendry says:

    The way to resolve all the issues in the mortgage market is to re-establish correct house prices, for the UK economy.

    To do this it is essential to put a stay on all mortgage lending, for a while. This way, prices would find their natural level, based solely upon people’s ability to pay such prices.

    This might sound inordinately harsh from the perspective of the lending institutions but a correction is needed, initiative needs to be taken.

    Having established the correct economic tone for house price levels, lenders could start making loans once again. However, as is well known across the industry, lending should always be limited in such a way that market prices are not materially increased as a direct result of the lending itself.

    Failure to impose such a discipline at any time in the future ought to mean that limits are immediately imposed by the appropriate watchdog.

    In fact, owing to the massive economic crisis that has unfolded, there will be a shortage of money available for lending by financial institutions. This is going to put these policies into effect automatically whatever lending institutions now do. Yes, it may be painful for a while but there is no sane alternative to be considered.

    Although we’ve been insulated from the immediate effects of the downturn by New Labour’s temporary actions, the effects of this, the biggest downturn in our history, will still have to be experienced, starting from the moment the emergency funding starts to be withdrawn. Widespread intensive care may be needed. It is this that the lending institutions ought to be focussing on and not how to restore the throughput of financial lending back to former levels again.