The FSA is considering major reforms of the mortgage market, including the option of regulating loan to value (LTV) ratios.
However, the regulator has put off any definitive decisions until Q3 at the earliest.
The report stated: "The FSA's paper on regulating the mortgage market will assess the strength of the arguments for and against [the regulation of products]. It will analyse the extent to which customer defaults and bank losses are correlated to either high initial LTV or loan-to-income (LTI), and will draw lessons from international experience.
"It will also assess the merits of direct product regulation compared with other potential policy levers such as (i) tighter regulation of mortgage selling and in particular greater focus on suitability requirements or (ii) more aggressive use of differentiated capital requirements against mortgages of different LTV or LTI."
The paper will also discuss whether the FSA should regulate second-charge and buy-to-let mortgages.
Michael Coogan, director general of the Council of Mortgage Lenders, commented: "We welcome the opportunity to explore the pros and cons of limitations on products in a rational way. And we agree that this needs to be done alongside an assessment of alternative ways of regulating to achieve the same risk-mitigating objectives.
"We see the FSA's September paper on the future of mortgage regulation as a real opportunity to help shape a future regulatory landscape that will serve both lenders and consumers better. We look forward to working constructively and collaboratively with the industry and the FSA towards this objective." For further analysis of the Turner Review, be sure to check next week's Mortgage Solutions magazine.
The report also announced major changes in the FSA's supervisory approach, building on the existing Supervisory Enhancement Programme (SEP), and outlined plans to regulate Credit Rating Agencies to limit conflicts of interest and inappropriate application of rating techniques.
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