The CML believes the recommendations provide a sensible package of measures that would, taken together, generate improvements in the UK mortgage market. However, care will be needed to establish cost-effective mechanisms to deliver them in practice.
As Professor Miles recognises, some of his first group of recommendations reflect existing best practice within the industry. The CML will discuss with members and the FSA the best way of embedding these more widely. There is a strong interaction between some of the measures Professor Miles suggests and the work that the FSA is doing to prescribe the information and advice that mortgage customers should receive under the new mortgage rules coming into effect in October.
The second group of recommendations (covering measures the Government might take to improve funding structures to allow for the further development of fixed-rate funding) would also make a helpful contribution, if the Government decided to implement them.
CML Director General Michael Coogan commented:
"Professor Miles has undertaken a commendably thorough and thoughtful review, and has drawn up an eminently sensible package of recommendations.
"The combination of increased transparency, enhanced consumer advice about risk, access to appropriate funding and technical improvements would together smoothe out the wrinkles in the mortgage market that Professor Miles has identified.
"In doing so, it may well be that an effect would be to increase the attractiveness of fixed rates from a consumer perspective. Some of Professor Miles' ideas, such as a free-standing interest rate cap insurance, are likely to be keenly explored by the lending industry.
"As Professor Miles says, there are great strengths in the UK housing finance system. We hope the Chancellor will also recognise this in his Budget next week. We are grateful to Professor Miles for identifying some concrete steps that could be taken to improve it further without introducing obvious detrimental side-effects."
