Charles Harensape, managing director of Aldermore Mortgages, said: “The MMR outcomes are fairly predictable. They make sense in the main but I do wonder why intermediaries are no longer required to assess affordability in order to give advice.
“And some of the changes including to interest-only calculations will require significant and costly system changes for lenders. I hope the cost/benefit analysis has been factored in."
Jonathan Westley, managing director of Experian’s UK Consumer Information Services business, said: “This news from the FSA will be welcomed by many within the mortgage industry.
“The revised proposals, particularly around income verification and future looking affordability tests, take a common sense approach to evaluating credit risk and reflect existing industry best practice.
“Recent advances in credit risk orthodoxy were developed in partnership with lenders and have enabled them to even more accurately understand consumers’ abilities to meet credit commitments and how they might change in the future.”
Mark Blackwell, managing director of xit2, said: “The Mortgage Market Review has highlighted why headline figures on arrears and repossessions should be taken with a pinch of salt.
“Lenders are under intense pressure from government and the courts to help borrowers in arrears. But as the Bank of England has said, lenders can’t sustain their current level of tolerance, particularly given there is more forbearance to high loan to value borrowers than originally assumed.
“Forbearance for these struggling borrowers is projecting a false image that all is well. It will only take a small downturn in the economy or a small rise in the base rate for these underlying dangers to rise quickly to the surface.
“There is a block of roughly 30,000 borrowers in arrears of 10% or more. These are “danger” borrowers who are already on life support machines courtesy of lenders’ generous forbearance policies.
“With the economy in a downward spiral, lenders will be forced to switch some of these life support machines off. At that point, repossessions will soar. We’re quickly reaching that point.
“Lenders will need to ensure they’re getting the best possible information about their borrowers’ finances if they are to make the right decision on how to manage arrears cases. As the scale of the problem grows, they will need to closely monitor the third parties they use to deal with it to ensure they are behaving responsibly and treating customers fairly.”
Commenting on the proposals for bridging loans and lenders, Bill Warren, managing director of Bill Warren Compliance LLP, said: “Much of the section relating to bridging lenders is looking at the risk profiles and need for greater capital requirements, even though the FSA accepts that the nature of bridging loans terms means lenders do not entirely need the higher capital adequacy.
“However they seem eager to be risk averse rather than accept industry records.
“There are clearly some challenges for bridging lenders especially those offering regulated loans resulting in less lender flexibility going forward but greater protection for consumers.
“So, based on this consultation paper, this is not a bad result for bridging lenders so far. As the FSA has made clear, it will consult more in the sector; the real end result could be slightly different but too much interference in a generally well-run and profitable market sector could have a huge impact on the wider property market destroying the recent progress.”
Nick Hopkinson, director of PPR Estates, said: “The FSA is continuing to try and shut the door after the horse has bolted with this latest lengthy discussion document.
“The regulator’s credibility in protecting consumers from excessive debts remains in tatters as far as the mortgage market is concerned.
“Surely, any lender wishing to stay in business will already be properly assessing repayment affordability for new loans; whether they are on a repayment or interest-only basis; and will be factoring-in the cost of future interest rate rises?
“Any proposed further regulation will simply cause more red-tape and reduce the availability of much needed credit through higher costs.
“This will inevitably put even more downward pressure on UK house prices which ironically could well result in more financial distress not less.”
Jane Manning, head of compliance at Crown Mortgage Management, said on interest-only mortgages: “Crown welcomes the FSA’s proposed reforms to the treatment of interest-only mortgages.
“The proposed reforms are not new but instead revert to procedures followed by lenders ten years ago.
“Crown is witnessing first-hand the impact on borrowers who took out interest-only loans without a suitable repayment vehicle or strategy in place.
“Some of these borrowers are reaching the end of their mortgage term and for many, there is no alternative to the loss of their home as they are unable to repay the mortgage and, due to their age and reduction in income following retirement, are unable to arrange further borrowing.”
