Mortgage reform proposals could rip housing market apart

News Category: Industry News

Proposed reforms to the mortgage market could devastate the housing industry from top to bottom.

The warning came from Michael Coogan, director general of the Council of Mortgage Lenders.

He attacked the Financial Services Authority over its Mortgage Market Review (MMR), currently out to consultation, which aims to tighten up on lending practices.

But in a ferocious attack, Coogan said that the MMR would blight Britain’s entire housing economy, reduce house prices and transactions, and stifle home-ownership aspirations across the nation, if brought in. 



Also hard hit – even more than now – would be the buy-to-let sector.
  

Speaking at the Future Housing Conference, Coogan savaged the FSA and spelled out what he called the ‘unintended consequences’ of MMR.

He accused the FSA of hiding behind ‘responsible lending’ when it actually meant no lending.



In his extraordinarily outspoken speech, Coogan also slammed the FSA’s prediction that house prices would fall, saying that making such a forecast was not part of a regulator’s remit. “I don’t think that it is the FSA’s job to predict price falls,” he said.



Talking about the housing market, he said so few lenders were actually already lending, the CML had struggled to find 30 lenders to “populate” its top 30 lender annual review. And this could get worse.



Coogan said the MMR was meant to be a comprehensive analysis on the part of the FSA, and an attempt by them to show they would not be “asleep at the wheel” in future. But, he said, the MMR was fatally flawed, was neither of these things, and should be evaluated before being brought in.

He said: “We would like to do more to ensure the FSA steamroller slows down or goes into reverse.” He said 11.4 million borrowers would become ‘mortgage prisoners’, unable either to move home or remortgage.



Coogan said he had no wish to return to 2007 when there was £367bn of mortgage lending. But he said that there was an opportunity – a very big opportunity – to home in on the £250bn potential borrowing now available after risks had been stripped out. But he said the FSA wanted to see no such level.



He said that first-time buyers would be affected, because they would need higher deposits and pay higher fees. They would be in their late 30s or older. Traditional first-time buyers would be priced out, but unable to qualify for social housing – even if there was enough social housing.

Self-certification mortgage borrowers would also suffer, with lenders increasingly unwilling to “do the paperwork” on the self-employed. 



“Normal customers?” said Coogan. They too will be increasingly turned away, if they have for any reason been credit impaired.

Interest-only mortgages, he said, will disappear. 

He said that even “ordinary” borrowers would struggle, as housing transactions would rely on them building chains of buyers and sellers in similar “ordinary” situations.



Coogan warned: “There will be fewer first-time buyers and fewer property investors. A lot of borrowers will be unable to move, because they will be mortgage prisoners. Transactions levels will fall further, if the MMR goes ahead.”

He added, obliquely, that CML research figures, to be made available shortly, will show that FSA presumptions are “extremely wrong”.


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