The FSA's Mortgage Market Review must not contain reactionary regulatory intervention, according to the Building Societies Association (BSA).
The trade body said reactionary regulation will deliver little or no benefit to consumers so the FSA needs to focus its attention exclusively on areas where there is strong evidence of failure.
Paul Broadhead, head of mortgage policy at the BSA, says regulation must be proportionate to the perceived failings in the market.
"If the FSA chooses to take a very prescriptive approach, this could mean many existing borrowers, who are already successfully repaying their mortgages, will find it difficult to remortgage in the future or in some instances get a new mortgage at all while many future borrowers will be deprived of the opportunity to take out a mortgage," he says.
He adds it is vital rules are consistent and do not discriminate against building societies so competition and consumer choice can be encouraged.
While it supports the introduction of an approved persons regime for advisors, the BSA fears the impact on lenders could be disproportionate.
Broadhead adds: "As the proposals currently stand, we fear that the regime will extend beyond those staff involved in the advice process. If implemented on this basis, it would have significant cost implications for little benefit."
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