The Mortgage Market Review could have a ‘profound and bad’ effect on the prospects for many people’s lives and also Britain’s wider economy.
While the MMR aims to crack down on irresponsible lending, a growing number of critics say it will mean a crackdown on lending altogether.
The latest warning was sounded in a House of Commons debate on MMR by Tory MP Robert Syms.
He also warned that the Financial Services Authority, which is behind the MMR, might be concentrating on the ‘wrong problem’.
He said that the current financial crisis and liquidity issues were primarily the result of a global problem: “They are not a result of a dysfunctional and widely irresponsible residential mortgage market.”
But Mark Hoban, financial secretary to the Treasury, defended the MMR, calling it an “essential step” to protect consumers and lenders.
He insisted: “It is clear that mortgage regulation failed by allowing an unsustainable boom in lending and increasing house prices, followed by the inevitable crash. We do not want to see that repeated.”
Syms said: “The market failures that the MMR is designed to address affects only a small number of lenders that were in the market. Some of these are no longer active.”
He said the FSA proposals were based on the patronising view that customers need protecting from themselves. He also said that borrowers with short-term difficulties should be able to stay in the home-ownership market and be able to remortgage.
Syms said: “If we get it wrong, we will all find people in our surgeries who cannot understand why a few years ago they got a mortgage and now they cannot.”
He also said it was important that the MMR allowed smaller lenders to continue to operate in the market.
John Woodcock, MP for Barrow and Furness, agreed, saying that smaller lenders such as his own local Furness Building Society are not ‘playing fast and loose’ and feel they are being penalised by the proposals.
Marcus Jones, MP for Nuneaton, also expressed concern about a lack of availability of mortgages up to 95% LTV.
He said: “The bigger issue is about lenders ensuring that they do not over-expose themselves to such loans. They should keep them proportionate within their mortgage book to make sure first-time buyers gain that vital access to mortgage finance.”
But Hoban countered by saying there was a lot of concern based on misinformation about the MMR. He added that nothing was yet set in stone.
He said: “Increased lending can force up house prices beyond the reach of those who want to get on to or move up the housing ladder, putting home ownership further and further out of reach for many.”
He added: “We do not want lenders to put their solvency at risk through aggressive lending.”
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Comments
The MMR is clearly needed, these MPs who are against it clearly don't understand economics. This whole economic disaster was caused by irresponsible lending on properties in the UK, USA and other western countries leading to property bubbles world wide. By returning to responsible lending prices will fall, people will afford again and transactions will rise. We need MMR for a healthy economy.
....“We do not want lenders to put their solvency at risk through aggressive lending.......”
To make a comment like that would seem that you, Mr Mark Hoban, think that the directors etc. of these lending companies are idiots!
If you are so sure of yourself why not set up a mortgage company of your own and see how long you would last.