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Grant Shapps brands MMR “a step too far”

Housing minister Grant Shapps has branded the Financial Services Authority’s Mortgage Market Review paper a “step too far.”

Speaking at the National House-Building Council conference yesterday, Shapps says he would not be able to get a mortgage under the current proposals.

When asked about the MMR, Shapps told delegates: “I am absolutely clear about this. I think it was at the point when I realised that I wouldn’t have been able to get a mortgage if the MMR changes went through that I thought this might be a step too far.

“There’s no point closing the door after the horse has bolted.

“The problem with the mortgage market was not some pernickity issue with whether you get X or Y percentage or what form you get the end user to sign.

“It was because there was a lack of central regulation on the way the banks were operating and their ability to carry on operating even after they didn’t have the balance sheet to do it as Northern Rock and Royal Bank of Scotland were doing.

“What we need is top level central regulation and not pernickity down in the dirt regulation and what you can and can’t do as a mortgage company.

“I hope the FSA will be getting that message. They are independent and are free to go off and do this work but I think it is important we learn from the lessons of the past without repeating them which is what I think they are in danger of doing.”

The Council of Mortgage Lenders recently called for a political debate on the Mortgage Market Review.



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  • Roy Conway 31st December 2010 at 12:23 am

    The MMR will serve to prevent house prices being bid upwards in the interests of mortgage advisor/EA commissions. An inevitable downward adjustment in prices will ease affordability. Keeping the ‘music playing’ by curbing necessary MMR proposals will worsen the evitable adjustment. Credit markets have changed for good. Avoid it you cannot!

  • Lucy 30th November 2010 at 10:34 pm

    Shame he doesnt apply the same criteria to benefits ….just in case he finds himself out of work sometime soon!

  • Grey Haired Underwriter 29th November 2010 at 11:12 am

    @ Stuart Duncan. I understand the basis of your comments regarding affordability on a repayment basis but you seem to have forgotten one thing. Your Civil Servant would not necessarily have a non-contributory pension scheme and the cost of building up his pension lump sum has a cost implication. On this basis how would you suggest that the lender allow for the cost of building the pension lump sum as of course not all of his pension contrbution will go towards the repayment of the mortgage?

    The majority of repayment vehicles have a cost implication and these need to be allowed for in some way.

  • anon 29th November 2010 at 9:33 am

    dont forget though – the poeple who trying to implement MMR are arrogant career politicos and will view this from Shapps as a right wing rant. At the end of the day Shapps does not have power over the FSA – neither does the electorate, treasury, etc etc.

    Shapps is soooo right – its piddling about on the edges – payslips and a P60 would not have prevented this problem – it was too much borrowing short and lending long with a weak balance sheet. Not that borrowing short and lending long is wrong (as is 100 ltv and self cert not wrong) its who does it.

  • anon 29th November 2010 at 9:29 am

    how about this – all mortgage lenders to decline applications from civil servants on the basis that they have very shaky jobs and there is no guarantee of future affordability.

  • David 27th November 2010 at 5:50 pm

    les get the AMI to get all brokers to donate £10 to getting this quote on every billboard / tube train around the FSA offices in canary wharf

    they would be forced to see it every day they went to work

  • Badger 26th November 2010 at 8:45 pm

    Interesting to say the least. A no-mark politician makes a sound bite comment and the broker community is swooning in admiration. In their undying love they have failed to spot the irony of Mr Scraps’ comment, ‘If I can’t get a mortgage, I don’t need a broker’

  • GMS 26th November 2010 at 5:05 pm

    Somebody needs to conduct a poll of FSA staff and see how many have self cert mortgages. The answer would be shocking.

    Hopefully now there is a government representative saying what we have all known for a long time there will be a proper consultation to the papers, not some half baked FSA debate.

  • mark wilkins 26th November 2010 at 4:56 pm

    I think this link and the discussions therin just go to prove the FSA have made life so difficult not even the professional involved can make head nor tail!!
    It would be interesting if the people at the FSA would go to a customer meeting with a broker and run the meeting in line with their own regulations. Has this been done, as it would make interesting viewing

  • Maurice Edgington 26th November 2010 at 4:35 pm

    I couldn’t agree more. Hopefully Mr Shapps opinion has some influence over his colleagues who collectively will actually do something.

  • Stuart Duncan 26th November 2010 at 4:09 pm

    “a bona fide cast-iron guarantee repayment vehicle” rules out almost everything then, I would think!

    Endowments, S&S ISAs, personal pensions and many occupational pensions are subject to performance and even FSS pensions are in flux.

  • Paul 26th November 2010 at 2:42 pm

    Stuart, my understanding is that the “repayment” part is dropped of you can prove you have a bona fide cast-iron guarantee repayment vehicle in place, which your pension lump sum may, or may not, be (gov can always change rules). It is also my understanding that FSA wants to tighten up on the criteria of eligible repayment vehicle, which excludes thigns like “inheritance” or “sale of proprety” etc.

  • Stuart Duncan 26th November 2010 at 2:28 pm

    It is the calculation of affordability, based on a REPAYMENT mortgage, even for those wanting an interest-only mortgage, that is the main problem.

    If a 56 year-old government employee due a £100,000 pension lump sum wishes to align that to an interest-only mortgage over 8 or 9 years, for example, he/she is almost certain to fail affordability.

    Furthermore, it is wrong to say that it is still in consultation because the FSA is already dictating to lenders on the basis of their proposals. The MMR is already reality. It seems bizarre to call for the repeal of an incomplete set of rules, but that only shows how anti-democratic the FSA is.

  • Anonymous 26th November 2010 at 1:42 pm

    To anonymous 12.43pm – Good question.

    This would suggest he has an unaffordable mortgage at present as there is not really a great deal of difference in how affortability should be calculated at present and what the responsible lending paper is proposing. E.g. in the main (excluding adverse) the MMR simply proposes that mortgage affordability should be calculated from free disposable income once all true expenditure has been deducted and verified.

    Where do people plan to get the extra income from if they are recommended mortgages that are more per month than their free disposable income? How do we as advisers stand making recommendations along these lines?

    Perhaps Mr Schapps will be seeking an Interest Only loan or has adverse?

    In any case the proposals are not even finalised and it is a bit premature to say he won’t be able to get a mortgage.

  • Duncan Jones 26th November 2010 at 1:41 pm

    Naturally I share in the delight of what Grant Shapps has said. However common sense to mortgage lending is unlikely to return for a while regardless of government or regulatory initiatives. To prevent a repeat of the past merely requires that lenders take responsibility for their lending decisions and if assessment of affordability is subsequently found to be less than rigorous then the lender will not be able to repossess the property. This alone would represent a robust method of self regul;ation just as it used to be before regulation!!

  • Philip Bealing 26th November 2010 at 1:15 pm

    Good point Colin, how will the proposal effect Self employed people in the Legal professions?

  • Paul 26th November 2010 at 1:07 pm

    Thanks Bobby. Are the banks not even allowed to price for the risk he never gets a job after his parliamentary term is ended, say at +400bps or so?

  • Luke Atkinson 26th November 2010 at 1:06 pm

    Why would a contract worker not be able to get a mortgage under MMR?

  • colin 26th November 2010 at 1:01 pm

    anon 12.43….he has 2 recent CCJ’s, arrears, and discharged bankrupt!!…..LOL…( injest)

    Philip 12.50….yes but Cherie Blair was a self employed legal eagle earning bundles wasn t she!!!!

  • Philip Bealing 26th November 2010 at 12:50 pm

    Bobby is right ,the fact that an PM will not be able to get a mortgage based solely on their income alone may put people off trying to enter Parliament ,
    How many people remember the size of Tony Blair’s mortgage compared to his publicized income?

  • Paul 26th November 2010 at 12:43 pm

    Why would he not be able to get a mortgage?

  • Bobby 26th November 2010 at 12:39 pm

    Grant shapps like all politicians are on a maximum 5 year contract and as such under the FSA’s proposlas cannot get a mortgage as indeed all contracts workers or self employed will not be able to get a mortgage. Only the employed with guaranteed income and perceived in cast iron certainty professions will be able to get a mortgage. New mortgage approvals with fall from 100000 a month in 2007 to 50000 now and 10000 after MMR.

  • colin 26th November 2010 at 12:37 pm

    a fairly public humiliation of the FSA proposals. Nothing that those in the industry were not already aware of but once the wider press & TV get hold of it, things could get interesting. Privately I imagine the govt are beginning to wake up and realise the loss of tax revenue and general positivity to a nations prosperity as regards property are at risk if this largely onerous plan is allowed to proceed!!!!!

  • Pat Bunton 26th November 2010 at 12:34 pm

    CP10/16 was the problem, it has quite rightly been roundly criticised for attempting to get into too much minutiae and frankly parts of it made little, or no sense at all. We have long argued that once elected officials realised that the outcome of MMR as laid out in CP10/16 would be to stop perfectly sensible constituents; in this case Mr Shapps himself from obtaining even their current mortgage, the cat would be out of the bag. In fairness to FSA CP10/28 is thought through far better and has not fallen into the same traps as the previous paper. For everyone’s sakes, not least of all the normal man in the street let’s hope that common sense prevails as we move forwards. With a government minister saying stuff like this I am sure FSA will sit up and listen – this is not just the industry saying you are going too far, it is now branching out far wider than that.

  • Luke Atkinson 26th November 2010 at 12:31 pm

    Wow, someone pinch me, I must be dreaming?!

    With the government minister in charge of housing as well as the CML and the AMI all airing concerns with MMR….not to mention the countless industry professionals that are crying out for some intervention on this draft paper, surely the bureaucrats will listen now?

    Well done Mr Shapps.

  • Tom IFA 26th November 2010 at 12:31 pm

    To Bobby. This hasn’t just happened there have been many who have been lobbying and highlighting facts for years hoping that one day sense will prevail.
    Had we not had a change from the Labour Party we would have all been doomed.
    I suggest that you as I and many of your colleagues have done and that is to keep your MP up to date with what is happening at the FSA and continue to do so until MMR and RDR have finally been put exactly where it belongs!
    Heads will have to roll one day as the public realise what fortunes have been spent.
    Lets win the battle first and point fingers later. FSA beware we know who to come after!

  • Philip Bealing 26th November 2010 at 12:28 pm

    The stand out point for me in what Grant Shapps is saying is that he would’nt be able to get a mortgage perhaps even after having spoken with a good intermediary , if the F S A get there way. I wonder if other politicians would have the same problem ,if so other people in politics need to be made aware of this ,because it could be the same for them.

  • Tory Boy 26th November 2010 at 12:15 pm

    The Big Dog has spoken….Hector Sants I hope your listening…

  • jeff 26th November 2010 at 12:14 pm

    At last, somebody is smelling the coffee. Lenders need the space to be innovative and lend to price and risk. The FSA seem hellbent on choking the life out of the patient before the last man out of the door shuts the light off.

  • Danny Lovey 26th November 2010 at 12:05 pm

    It is pleasing thar Grant Shapps has got the issue on the MMR and can see the FSA over kill on the matter even if Mark Hoban cannot.
    Do not underestimate Grant Shapps opinion

  • Bobby 26th November 2010 at 12:00 pm


    Someone important who says it as it is.

    No disrespect to fellow brokers and cherry but this statement will be 100 times more affective in derailing MMR than anything the industry has done themselves.

  • colin 26th November 2010 at 11:58 am

    hhmmm….interesting, someone at last is waking up to the fact that the MMR is too OTT. The FSA seem hell bent on a risk free mortgage market…….well as we all know the pursuit of such will close all doors to home ownership aspirations for many. The industry has pretty much got its own house in order……..its far harder to get a mortgage than at anytime in the last 10-15yrs…… usual the FSA come along with some highly convuloted idealistic paper that doesn t work in the real world. The fact they are unable to differentiate between Fast Track & Self cert speaks volumes for their grasp of our market.

  • Martin Tapper 26th November 2010 at 11:56 am

    Grant Shapps we may fall in love with you yet!