As mortgage lenders approach the first anniversary of the regulation of their industry by the Financial Services Authority (FSA), the CML has emphasised to Government that this is only one of a broad range of regulatory initiatives currently affecting lenders and adding costs for their customers.
In its pre-Budget submission to the Treasury, the CML estimates that new regulatory initiatives could add a further £500 to £1,000 to the cost of buying a home. The rising costs of regulation are in danger of swamping the Government's plans to expand home-ownership, the submission says.
Whatever the strengths and weakness of the FSA rules, which came into effect on 31 October last year, the regulator's requirements continue to impose significant demands on firms, with lenders facing visits from supervisory staff and the prospect of a forthcoming review of the mortgage rulebook. Aside from the FSA regime, however, lenders are also having to respond to a complex range of new regulatory initiatives. The most significant of these are the new Basel Two capital requirements and the proposal to introduce home information packs in 2007. But the CML's pre-Budget submission details a much broader range of additional regulatory initiatives affecting mortgage and housing markets and emerging from different Government departments, as well as devolved administrations and Europe.
The rising tide of regulation conflicts with the agenda for growth of home-ownership set out by the Government before the general election. The CML supports that goal, and has been working closely with the Government on ways in which private finance can stretch the limited public resources available to extend home-ownership. The pre-Budget submission acknowledges the difficulty of assessing accurately the costs of all the new regulatory initiatives, but points out that they will be felt most acutely by those on the margins of home-ownership that the Government must help if it is to bring about an expansion of home-ownership.
Commenting on the pre-Budget submission, the CML deputy director general Peter Williams said: "The FSA's mortgage rulebook is simply one strand in the mesh of regulation affecting the lending industry. The breadth and complexity of the Government's measures is surprising, given that mortgage markets are generally competitive and efficient. The scale of intervention is at odds with the Government's commitment to de-regulation, or even better regulation.
"We urge the Government to consider ways of making markets more efficient before resorting to direct policy intervention. Each separate initiative has its own strategic and operational consequences for the industry so, if there is intervention, we need much better co-ordination of the measures being pursued by different arms of Government. We applaud the Government's achievements in securing low, stable interest rates and a strong labour market, but the issue of regulatory costs needs to be addressed urgently before it completely undermines the drive to expand home-ownership"
