It is the first indication that the Treasury is listening to the concerns of the mortgage industry, which is worried that restricted freedom of choice for consumers would be an unintended consequence of the MMR.
Speaking about the impact of this regulation, Financial Services Authority chairman, Lord Adair Turner, acknowledged in his September Mansion House speech that the regulator "will need to explain carefully the tradeoffs it has chosen on society's behalf and encourage open public debate on whether those are tradeoffs which command broad support".
The consultation period on the FSA's paper on responsible lending is supposed to provide the forum for this debate, but Peter Williams, executive chairman of the Intermediary Mortgage Lenders Association, said the debate had to be wider than this.
"It can't be a simple response to the MMR," he said. "That isn't where this debate ends. We need sustained discussions around what the future of UK housing looks like. The MMR is determining the fate of the UK housing market and its shape in a way that is not in the gift of the FSA."
He added that the Treasury and FSA have been "essentially silent" on when the debate proposed by Turner would happen.
But following an enquiry by Mortgage Introducer, the Treasury released this statement: "Government ministers and officials meet regularly with key industry figures to discuss the issues affecting the UK mortgage market, including through the Home Finance Forum, which brings together mortgage lenders, consumer groups, intermediaries, the FSA, Bank and Government.
"The Coalition Government will continue to work with the FSA, mortgage lenders and consumer groups to ensure a mortgage market that is sustainable for all participants. The Government welcomes the FSA's review, and encourages all those with views to engage constructively in that process."
Williams added: "I think we're at a defining moment in terms of UK housing provision. There are risks that we will see significantly shrunken homeownership, a much bigger private rented sector, expanded intermediated homeownership, and ultimately opening up the agenda for a bigger social rented sector.
"That's a big set of issues which are well above and beyond the FSA's remit. Lord Turner recognised this. We now need a sensible, informed debate about what is achievable and desirable in the market with the industry, authorities and the public."
Adrian Coles, director general of the BSA, said: "I agree with Peter, there are big questions that have to be asked. Do we aspire to higher levels of owner occupation? How do we provide rental accommodation if we need more?
"These are huge societal matters and not just banking regulatory issues. There are tensions here about what sort of market we want."
Robert Sinclair, AMI director, added: "Lord Turner again shows great sense in suggesting a more comprehensive, holistic debate and the industry would welcome the opportunity to conduct this on an open basis with the key decision makers at the FSA."
Sinclair said that if the Home Finance Forum was to be where the debate was held, AMI would want to participate. Currently the trade body is not involved in this meeting.
The CML added: "We agree with Adair Turner that there should be a debate on the future of the mortgage market. It should be an ongoing process rather than a one-off event and we published our research this week as a contribution to that continuing debate."
