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MMR timetable must heed economic woes

The regulator’s aim is to ensure a sustainable mortgage market that works better for consumers, and is competitive and flexible without exposing lenders to unnecessary risks.

It should lead to higher quality mortgages being sold, resulting in lower house price growth, and reduce arrears and repossessions.

The main impact on lenders and mortgage advisers has already been felt following the changes since 2007, but the Mortgage Market Review will continue to affect the mortgage market in different ways.

Small lenders that do not offer an advice service or have access to current account data must raise their game to remain competitive against larger lenders that largely meet MMR requirements.

Retail-funded firms with access to the capital markets will have an advantage over non-banks that are unable to write new business because of funding constraints.

For consumers the MMR will lead to fewer mortgages being available, tighter lending rules and higher costs reflecting the risk of long-term loans.

But the FSA is consulting on transitional affordability provisions that would apply to existing borrowers. The key question is whether the MMR may have unintended consequences that are harmful to the market.

The timetable for implementing the reforms will also need to be sensitive to the economic environment, so it is still not certain that the new rules will come into effect in 2013 as planned.

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