The proposed controls on mortgage lending in Britain are too restrictive and would lock out many would-be buyers from the housing market, the Council of Mortgage Lenders (CML) said today.
If the FSA’s Mortgage Market Review proposals had been in place between the second quarter of 2005 and the first quarter of 2009, around 3.8m “good” loans would have potentially not been granted, according to the Council of Mortgage Lenders. It says this equates to around 51 per cent of total loans in the period.
"The current proposals sacrifice far too many borrowers and do not chime with our recent research on the levels of consumer aspiration to become homeowners in the future," the CML said.
The Financial Services Authority said in July it wants banks to check prospective borrowers' income and spending before approving loans, and also proposed an outright ban on self-certification mortgages; dubbed "liar loans" where no proof of income is required.
The CML found on the basis of affordability alone, 16 per cent of loans between the second quarter of 2005 and the first quarter of 2009 would not have been granted a mortgage.
The restrictions are aimed at preventing reckless mortgage lending, after a build-up of bad loans contributed to the banking sector's problems during the financial crisis.
"Our proposals are designed to address the major failures that have occurred in the mortgage market and we are actively consulting with all stakeholders to ensure we get the right solution," the FSA said in a statement, responding to the CML.
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