Speaking at Manchester Mortgage Business Expo, Robert Sinclair, AMI director, said the FSA was expecting interest-only lending to remain an important part of the mortgage market in the future.
This marks a change in outlook after the regulator backtracked on a possible ban of interest-only mortgages under the Mortgage Market Review.
Sinclair added that he believed staff at the FSA in charge of the MMR were now “genuinely consulting” with the industry on issues such as interest-only and making affordability assessments mandatory over a 25 year term.
He said he believed MMR discussions had now reached a point of “reasoned debate” in contrast with discussions on the Retail Distribution Review, which were still stalling.
Sinclair added that he thought a “ normal market” was between £180bn and £200bn gross but that it would take four or five years to reach this volume of lending.
Alan Cleary, managing director of Precise Mortgages, said he thought gross lending this year would contract, hitting around £125bn.
Last year the Council of Mortgage Lenders said gross lending was £136bn.
