FSA intervention in the mortgage sector in the near future could deliver the wrong outcomes for consumers as the market is still not functioning normally, the CML warns.
In its submission to a review on the future of mortgage regulation, the trade body says proposals for regulatory reform must focus on areas where evidence of consumer detriment have been clearly identified.
It says some previous concerns about the mortgage market have already been addressed by the way in which firms have responded to changed market conditions.
As a result, it argues there is no need for “urgent intervention” by the FSA to change the mortgage rules or implement broader regulatory reform.
The CML says the European Commission's ongoing review of responsible lending and borrowing was another reason for caution. It believes it is crucial for consumers, as well as firms, that UK and European proposals do not conflict.
Michael Coogan, director general of the CML, says the FSA faced a number of challenges and potential pitfalls in progressing its review too quickly.
“Perhaps the biggest of all is to resist external pressure to implement measures at a time when the mortgage market has self-corrected many of the past problems, but is still not functioning effectively.”
Coogan stressed existing mortgage rules had broadly been working well since they were introduced in 2004, enhancing protection while promoting competition and choice for consumers.
He explains: "The current problems stem not from a failure of the mortgage rulebook, or from widespread credit problems in a recession, but essentially from past approaches to supervision of the rules and an over-supply of money to lend out.
“Now the pendulum has swung and the problem is the lack of available mortgage finance. Regulatory intervention on mortgages is unlikely to reverse this trend and may accentuate the problem.”
The FSA’s discussion paper on the future of mortgage regulation is due to be published later this month.
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