Treasury Select Committee member George Mudie says he is horrified by the proposals in the Mortgage Market Review.
Speaking at a TSC meeting last week on competition and choice in the banking sector, Labour MP Mudie says he thinks the MMR would damage the mortgage and house building sectors.
He told the committee: “I am horrified by the MMR. I think the FSA has lost its balance, to guard against ’you were weak and are still weak’. They have swung the other way and could damage the building industry and the mortgage industry and young kids getting a new house because of all the regulations.”
He asked Graham Beale, chief executive of Nationwide Building Society, whether the FSA was micro-managing regulation and whether it was not the job of the borrower and lender to assess risk.
Beale told the TSC: “I don’t think the FSA did a full economic assessment in terms of understanding the implications of the MMR and what it would do to the ability of borrowers in the UK to borrow from banks or building societies.
“When it eventually did, it realised there were unintended consequences, which is why it has entered consultation with a view to getting something more pragmatic.
“It will now hopefully achieve some of the safeguards it intended but not undermine the market.”
Last week the TSC published its final report on financial regulation. It said the authorities should take their time in introducing reforms to ensure that rules that are “effective but proportionate”.
Michael Coogan, director general of the Council of Mortgage Lenders, says: “The Treasury Committee has introduced a dose of common sense into the debate.
“It is essential that we take the time to introduce the right reforms, and strike the right balance between protecting consumers and ensuring they have access to mortgages at a reasonable cost.”