MMR: FSA proposals ‘risky’

The FSA’s plans to introduce affordability tests, income verification and protection for vulnerable borrowers are considered ‘risky’ - and not necessarily needed - by Datamonitor.

The independent business analyst is concerned that these proposals will further restrict lending in an already constrained market.

Daoud Fakhri, financial analyst at Datamonitor commented: “If the outlined proposals become a reality, the longer-term consequences could be significant. The plans could prevent non-mainstream mortgages from ever re-emerging.

“As there is a long-term trend toward self-employment and contract working, increasingly large numbers of consumers could find themselves denied access to mortgage finance as they simply won’t have the proof of income that the new regulations will require.

“Therefore the FSA’s plans, as well-intentioned as they are, could potentially deprive many thousands of individuals of the chance to own their own property, or to move to a new home.

“Data shows that arrears and repossessions have been falling in number since the middle of 2009, suggesting that the problem is not as bad as the FSA believes.

“It is therefore debatable whether the new proposals from the FSA are really necessary.

“Lenders have already withdrawn from higher-risk sectors of the market of their own accord.

“The main problem currently facing the market is an acute shortage of mortgage finance, particularly for first-time buyers, rather than excessive or irresponsible lending.”