Bid to encourage responsible lending given broad welcome

The Council of Mortgage Lenders (CML) had feared the plans would harm consumers and lenders, but said it was satisfied the FSA had listened to its concerns and was providing “sensible safeguards”.

CML director general Paul Smee said: “Lending needs to be responsible and done in a way which protects consumers.

“Rules need to be practical and avoid unintended consequences.

“Whilst there is much detail to be pored over, the FSA’s new proposals seem to strike broadly the right balance.”

Paul Broadhead, head of mortgage policy at the Building Societies Association, said: “No one is looking for a regime that permits lax lending practices. However, the original proposals were in danger of locking credit-worthy borrowers out of the market or imprisoning those with immaculate payment records, but non-standard profiles, in their current homes and loans.

“This seems to have been avoided which is good news for the self-employed, those in existing self-certified mortgages and people with negative equity.

“The new regulations appear to have struck a reasonable balance between allowing lenders flexibility when assessing affordability, whilst maintaining a sensible level of consumer protection.”

Campbell Robb, chief executive of Shelter, outlined how reckless lending had caused widespread misery, saying: “At Shelter we have seen too many people go through the trauma of repossession and we know only too well how it tears lives apart.

“Unaffordable, reckless lending caused misery to thousands of home owners who ended up falling behind on mortgages they had no hope of paying back, leaving them to face eviction and homelessness.

“We are very pleased the FSA are committed to greater mortgage regulation, including income checks and affordability tests, which are both much needed and long overdue.

“We urge the FSA to implement these measures swiftly so we can put an end to irresponsible lending once and for all and ensure no one else has to needlessly go through this nightmare again.”

Grenville Turner, chief executive of Countrywide, the UK’s largest mortgage broker and property services group, said: “Mortgage advice does not allow for a one size fits all policy and we’re pleased the MMR proposals finally accept this.”

Andrew Baddeley-Chappell, head of mortgage strategy and development for the Nationwide building society, added: “We welcome the review and the fact that the FSA has responded to the issues raised by borrowers and lenders.

“However, the current mortgage market is fragile and growth is relatively weak. With this in mind, we question whether now is the right time to ask the industry to divert its focus onto further regulatory changes.”