The mortgage markets have been turbulent to say the least over the past couple of years, and many of the problems that have almost brought the financial sector to its knees have been blamed on irresponsible mortgage lenders over the past decade, where high income multiples, extended repayment periods, lending to those with bad credit, jumbo mortgages, and high risk lending was all part and parcel of the mortgage lending sector.

With this in mind the Financial Services Authority has recently announced some changes to the mortgage lending sector, which could cut the risks involved so that this sort of financial meltdown does not occur again, but could also make things difficult for lenders and borrowers, such as those that cannot prove their income.

A number of industry groups and experts have offered their opinions on these changes, with a number of reactions to the changes, as reported in the Guardian, outlined below.

An official from the British Bankers’ Association stated: “When they offer mortgages, the UK’s high street banks pay particular attention to their affordability for each individual customer, considering a range of factors which is not limited to salary multiples or loan-to-value ratios. Therefore the banks welcome the FSA’s similar emphasis in this paper on the overall affordability of the mortgage for the customer, and their focus on mortgage-broking activity and higher-risk lending. It should be a firm principle of mortgage regulation that higher-risk borrowers, such as self-employed people and first-time buyers, are not effectively cut out of the market. The issue that faces all of us – lenders, borrowers and regulators – is ensuring the risk of taking out a mortgage can be shared effectively. Any new rules must not serve to create unreasonable obstacles either for lenders or for borrowers.”

The consumer campaign group Which? has welcomed the reforms, but is concerned over why the FSA left it so long before taking action. A spokesperson for the group said: “We’re pleased that the FSA is looking to take a more robust approach to regulating the mortgage market, although we would like to see tougher measures, such as a ban on mortgages over 100% and the naming of lenders that mistreat their customers. Mortgage providers are already responsible for assessing affordability, so why is the FSA only getting tough on it now? Many borrowers are suffering the consequences of irresponsible lending.”

The Citizen’s Advice Bureau also responded to the changes, stating: Stricter tests to ascertain consumers’ ability to afford a mortgage, banning the sale of mortgage products that put consumers at risk and, in particular, a ban on arrears charges when borrowers are already repaying, should ensure enhanced protection for borrowers which is long overdue. Citizens Advice would like assurance that the measures requiring mortgage advisers to be personally accountable to the FSA will work in practice. We would also like to see uniform consumer protection for all secured lending and for the FSA’s scope to cover this, as well as lending secured on a home.”

The Council of Mortgage Lenders’ Michael Coogan stated: “We agree with the FSA that regulation in itself cannot resolve the problems of the recent market. However, we also agree that clearly delineated responsibilities, which remove regulatory ambivalence, will help lenders, intermediaries and consumers to know where they stand, and to accept the consequences of their actions. As always with regulatory change, the devil may be in the detail. But we welcome the consultative approach, and look forward to working with the FSA to ensure that the objective of regulatory fairness between lenders, intermediaries and consumers is achieved in practice.”

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