Analysis done by the Financial Services Authority reveals the affordability assessment, the interest rate stress test and the interest-only proposals together are estimated to affect 2.5% of borrowers in subdued market conditions and 11.3% in boom market conditions.
The FSA said: “We found that the number of borrowers estimated to experience reduced well-being under the MMR is greater than the number estimated to enjoy increased well-being under the MMR.
“In fact, given the low overall level of mortgage impairment in our sample period, any policy, but more so any quantitative rules, is likely to stop more loans that would not have become impaired than loans that would have become impaired.”
However, the FSA went on to claim the MMR “can still deliver net benefits”.
The regulator believes the ratio of loans that would have become impaired to all loans prevented or reduced by the responsible lending proposals has a tipping point of around 20%.
Based on this, the FSA estimates that up to about 30% of the borrowers affected by the overall package of proposals would have gone into impairment.
It consequently says the policy is net beneficial in “well-being terms”.
Grenville Turner, chief executive of Countrywide, said: “In an environment where lenders are already being extremely cautious with their lending criteria by placing all affordability assessments at the doors of lenders risk teams this could create an even stricter lending environment.
“To ensure that these measures do not stagnate the market further, lenders will need to become more flexible with the affordability assessment criteria for new borrowers including a workable replacement for the self-employed and homeowners stuck in negative equity.”
