The Mortgage Market Review (MMR) will set house prices tumbling, says the director general of the Council of Mortgage Lenders (CML).
Michael Coogan told a CML conference in London the FSA's impact assessment showed the MMR's implementation would cause house price falls.
The CML says a drop in house prices is one of several unintended consequences of the FSA's well-meaning but misguided proposals.
It says the UK's existing 11 million mortgage borrowers have every right to be concerned about the changes.
At last night's Mansion House dinner, FSA chairman Lord Turner spoke of the need to "strike a balance" between regulation that protects consumers and which affect others seeking to make "sensible, affordable choices".
"We cannot leave retail financial markets entirely to themselves and continue to accept the waves of mis-selling which have been such a feature of UK financial services for the last 20 years - personal pensions, endowment mortgages, split capital trusts.
"But nor should we swing to the other extreme and attempt to ensure that nobody ever exercises free choice to make decisions they subsequently regret."
Coogan's speech summarised some of the areas the CML believes the regulatory pendulum is swinging too far.
"We do not want to sleepwalk into a housing finance market which is sustainable, but meets almost nobody's aspirations because it is so risk averse".
The CML says it will shortly be outlining the findings from internal analysis and externally commissioned independent research about what sort of mortgage market the UK wants to end up with.
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