Response: Mortgage Market Review - proposed package of reforms

By: Nicola Hughes  Published: March 2012


Every day Shelter advisers see the tragedy of people losing their homes. All too often, this could have been prevented by more responsible behaviour by mortgage lenders. Our research has shown the devastating effects of arrears and repossessions; including negative wellbeing impacts and stress forfamilies, wider damage to the housing market and increased costs to the state.

Summary

Loose credit is not the best way to help first time buyers - as they themselves recognise.4 We need a less volatile market where house prices are not so drastically out of line with household incomes and new buyers don't have to over-leverage just to get a foot on the ladder. Market volatility also damages existing homeowners who find themselves trapped in negative equity. Responsible mortgage lending is a key tool to promote market stability, as recognised by both the OECD and the IMF, and vitally important in the UK where we have one of the most persistently cyclical markets and highest mortgage debt to GDP ratios of advanced economies.

 

We welcome the latest draft of the FSA’s proposals and we are keen that, given the long timescales and careful deliberation that has gone into the process so far, they are implemented swiftly to bring certainty to the mortgage market. We note that there have been a number of concessions to the industry to make the rules more flexible than in previous drafts. The rules must not be watered down any further and we expect the regulator to supervise the market and interrogate lender’s policies much more closely than it did prior to the market collapse. Our response focuses on the conduct of business proposals and particularly on responsible lending.

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