The Financial Services Authority has dismissed suggestions that the Mortgage Market Review is responsible for a drop in lending levels and a more risk-averse market.
Some industry commentators have previously criticised lenders for implementing parts of the MMR before the FSA has introduced its final rules, especially in interest-only lending, where lenders have significantly tightened criteria.
Gross lending has fallen from around £363bn in 2007 to around £140bn last year.
Speaking in a seminar at the Mortgage Business Expo in Manchester last week, Lynda Blackwell, manager of mortgage policy at the FSA, says the MMR is not to blame for this – it is a result of lenders struggling to obtain funding.
Blackwell told delegates: “Even though we have yet to publish final rules, we often read that it is the MMR that has caused lenders to curtail their lending and that it is the MMR that is causing lenders to be excessively cautious.
“It is all too easy to hide behind the MMR but the reality is that with funding so much thinner on the ground, lenders are, of course, going to use this to support high quality lending.”
On a more positive note, she told delegates the regulator was pleased with the level of dialogue and communication it had received from all mortgage stakeholders regarding the MMR and was keen to stress that “the fat lady has not sung yet” in relation to the final rules.
On the issue of the European mortgage directive, Blackwell told the audience: “Firms want regulatory certainty. Our view is that the directive shouldn’t be delaying the impact of the MMR. We will certainly align the impact of the MMR with the directive to reduce the burden on regulatory firms.”
Blackwell says the most contentious part of the MMR proposals with lenders had been the removal of the non-advised sales process.
She adds: “The MMR proposals will mean the majority of sales are advised. This will represent a significant change for lenders and will accelerate the trend towards adviser sales for lenders.”