The Council of Mortgage Lenders (CML) have worried conveyancers with its warning that proposals by the Financial Services Authority (FSA), to encourage responsible lending, will cause house price falls.
The financial watchdog is currently consulting on ways to stop "excessive" mortgage lending and has already proposed affordability tests for all mortgages to ensure that lenders get “back to the basics of responsible lending”. The very low levels of housing transactions at the moment will make many conveyancers wonder whether this review is needed at the present time.
It also wants mortgage customers to verify their income and this could see the end of self-certification loans — where no proof of income is required.
The watchdog said its Mortgage Market Review wants to ensure that lenders only lent money to those who could afford it. The CML has described it as a well-meaning but misguided proposal and it believes more people will lose out on home ownership, as a result. The Council says the FSA has admitted its plan will lead to house prices falling. "This is just one of a number of unintended consequences of the FSA’s well-meaning but misguided proposals that the CML believes the UK’s existing 11 million mortgage borrowers have every right to be concerned about," said the CML’s director general Michael Coogan, citing a footnote in the FSA’s consultation document, which was published in July. This said that economic modelling of the consequences of its proposals "did project significant falls in house prices from the reduction in lending”.
The CML argues that if house prices slump again, mortgage rationing would continue and these proposed new restrictions will not help people meet their aspirations to become homeowners.