Housing market 'would have been decimated' by sensible lending

If proposals on responsible lending had been in effect from 2005, the housing market would have been decimated.

The claim has come from the Council of Mortgage Lenders, which says that around 3.8 million perfectly sensible loans would potentially not have been granted.

The Council of Mortgage Lenders makes the point after carrying out an impact assessment of the Financial Services Authority'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
(estateagenttoday.co.uk)

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