Speaking at a Treasury Select Committee meeting this morning on competition and choice in the banking sector, TSC member 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 they 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 the 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 a lot of unintended consequences, which is why it has now gone into consultation with a view to get something that is more pragmatic.
“It will now hopefully achieve some of the extra safeguards it intended but not undermine the market.
“The FSA is right in wishing to eradicate the state of the mortgage market prior to the crisis where the lack of constraint around lenders like Northern Rock led to 125% LTV mortgages and lending against high loan to income multiples.
“This went beyond the relm of reasonable responsible lending and its right we don’t have an environment where this could repeat itself.”
But Mudie replied: “I think the scheme seems far from that and seems almost personal and would rob building societies of any discretion in terms of individual customers.
“It is one thing building a mortgage book up of doubtful loans but another taking a chance on a young couple that are in work but cannot get a deposit.”