The plan describes what the Consumer Panel wants to see from the FSA’s Mortgage Market Review set in the context of the reform of financial services regulation.
The six key points for a sustainable and healthy mortgage market are:
Effective regulation to help consumers
Effective regulation needs to prevent irresponsible lending while not overly constraining the market for millions of responsible borrowers. The FSA’s policy needs to be based on a robust and comprehensive cost benefit analysis.
Regulatory policy to take account of wider social and economic implications
The Panel wants to see joined up thinking on the MMR and its wider implications for housing policy.
Lenders required to judge affordability and suitability for individual consumers
Lenders should take responsibility for assessing whether consumers can repay according to their individual circumstances, with an intelligent, tailored assessment of potential risks, rather than having overly prescriptive rules which could be unfair to some consumers.
Transitional arrangements which take account of the implications of the changes for all segments of the market
Those with historic mortgages need to be taken into account in the transition to any new mortgage regime. The timing of implementation of new affordability tests will be crucial.
A future regulatory structure responsive to consumers’ needs
It is vital that the interests of consumers are adequately represented in the new regulatory structure. The Panel is concerned that the new Financial Policy Committee may not take adequate account of the consumer interest when making important decisions about the mortgage market.
Balanced debate which overcomes the polarised views on the mortgage market
The current heated debate over the MMR should not divert attention away from the needs and interests of consumers who either have, or aspire to have, a mortgage. The Consumer Panel seeks to represent all consumers and is working with the FSA to achieve good consumer outcomes.
The FSCP chair, Adam Phillips, said: “Over the last few years we’ve seen some reckless lending by banks. Stronger regulation is undoubtedly needed to stamp out bad behaviour. However, there is a need for a balanced approach which takes full account of the social implications of any change.
“The Panel is pleased at the FSA’s plans for further consultation on the MMR. However, we are concerned that the public debate is too polarised between the need to protect vulnerable consumers and the need to ensure the widespread availability of affordable mortgages. A well functioning mortgage market must do both, as I hope the FSA will recognise.”
