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FSA advisory panel calls for MMR to be delayed

The Mortgage Market Review should be delayed until the market has recovered, the Financial Services Consumer Panel has recommended.

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.

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  • Stuart Duncan 1st June 2011 at 1:50 pm

    50/50 split in comments between those who have studied the MMR proposals and those that have not, because, like the FSCP say, it is highly dangerous to existing borrowers. The actual argument, however, should be to demand reversal of the MMR, because lenders are already applying it, under pressure from the FSA, even though they promised not to until the time was right and the consultation was complete. All I would ask is that the FSA keep their promises.

  • Keith Butler 1st June 2011 at 11:40 am

    Unbelievable. Wait until the market recovers and no doubt the argument will then be that any change could damage the market or why change something that’s working OK?
    The uncertainty of not knowing what changes are coming down the line is what’s damaging the market.
    Wasn’t it Charlie Brown in the Peanuts cartoon who once said “Remember, no problem is so big that you can’t run away from it!” Perhaps that should be the motto of the Financial Services Consumer Panel.
    Looks like everybody’s just washing their hands of it and waiting for the Europeans to impose legislation on us.

  • Malcolm Dunn 1st June 2011 at 11:37 am

    At last !! Someone with some common sense !!! The MMR would cause the industry to implode at the current time, there are few proposals in it that actually benefit the industry, the consumer, or the lenders…….I hope the FSA have the sense to do something which on past performance they rarely do….its called LISTEN !!!!!!

  • House Building Bloke 1st June 2011 at 11:10 am

    Wait until there is another asset bubble to start regulating? sounds to me like the FSCP wants to wait until the Horse has bolted again before shutting the stable door

  • George Williamson 1st June 2011 at 11:02 am

    Well done to the Financial Services Consumer Panel – your thinking is spot on. I just hope that the FSA will not ignore your sensible suggestions.