The panel is an independent statutory body and was established to advise the Financial Services Authority on the interests and concerns of consumers and report on the regulator’s performance in meeting its objectives.
At the launch of its six-point plan for a sustainable and healthy mortgage market today, the FSCP says there is a danger that those with mortgages taken out during the credit boom will not be able to remortgage elsewhere if the MMR is brought in too soon.
It could not put a time frame on when it wants to see the rules introduced but says it could be later than 2012 if the market has not recovered by then.
In its report, it says: “Timing will be crucial. There is a danger that lenders will reject mortgages which they view as not complying with the MMR and so further restrict consumers’ options during a period of general lending restraint.
“To avert this danger, implementation of new affordability rules should be delayed until the housing market has demonstrably recovered.”
It also recommends the FSA does not introduce LTV caps, that interest-only mortgages are not banned and that the mortgage term is not restricted to 25 years.
It says the FSA should not introduce an additional buffer for credit-impaired borrowers and does not think the current stress-testing proposals are adequate.
The FSCP believes lenders should take responsibility for assessing whether consumers can repay according to their individual circumstances, with an intelligent, tailored assessment of potential risks, rather than having overly prescriptive rules which could be unfair to some consumers.
It is also against any additional responsibility being placed on consumers.
Adam Phillips, chairman of the FSCP, says: “Over the last few years we’ve seen some reckless lending by banks. Stronger regulation is undoubtedly needed to stamp out bad behaviour. However, there is a need for a balanced approach which takes full account of the social implications of any change.
“The panel is pleased at the FSA’s plans for further consultation on the MMR.
“However, we are concerned that the public debate is too polarised between the need to protect vulnerable consumers and the need to ensure the widespread availability of affordable mortgages. A well functioning mortgage market must do both, as I hope the FSA will recognise.”
The FSA’s proposals for responsible lending are expected in July.
The FSCP also wants the FSA to carry out a more robust financial cost analysis of the MMR, which it says it believes it is doing.