FSA MORTGAGE PROPOSALS RISK EXACERBATING ALREADY ACUTE HOUSING CRISIS

The Home Builders Federation, Chartered Institute of Housing and the National Housing Federation, (represents England's housing associations) have joined forces to warn of the dire consequences of the FSA’s proposals to change the regulation of mortgages .

They say FSA’s proposals would be so onerous and overly-prescriptive that they would put many lenders off providing mortgages – as they would be so expensive to implement.

The new rules would decimate mortgage availability especially for first time buyers, whose numbers are already at historically low levels, and lower income households. The plans have far reaching social and economic impacts, including a dramatic reduction in house building levels, already at an 80 year low.

Reduced house building that directly and indirectly supports professions from estate agents to brick manufacturers – would result in job losses the impact of which would ripple through local economies across the country.

Independent research shows that if the FSA’s draconian proposals had already been implemented, of the 11 million current mortgage holders;

• Nearly half wouldn’t have been able to borrow what they did
• Up to a quarter may not have been able to borrow anything at all

Moving forward, it is estimated that each year the proposals would mean;

• Up to 153,000 house purchases could not be possible
• 57,000 FTB’s would be refused mortgages

The implications for the housing market of such a reduction in mortgage availability – already one of the main constraints on housing delivery - are clear, and additional pressure would be placed on the already overstretched private and social rental sectors, where 5 million people languish on Local Authority waiting lists.

The organisations also warned that unless the FSA changed its view that lending on shared ownership properties is sub-prime, the banks would continue to turn away more than £240m of valid business. In 2009/10, this resulted in 4,600 low cost homes being left vacant, even though 110,000 households had applied to move into them.

Speaking today, Stewart Baseley, Executive Chairman of the HBF said; “Of course lenders should lend responsibly and the FSA has a responsibility to regulate that lending. But these disproportionately severe proposals would have implications far beyond that and risk destabilising the already fragile housing market still further. The social and economic implications of delivering fewer homes at a time where we already have an acute housing shortage are dire.”

On the issue of the FSA’s guidance on shared ownership lending, Federation chief executive David Orr said: “If the FSA does not amend its stance, it will strangle mortgage lending for first time buyers and destroy the ability of lower income families and key workers, priced out of the open market, to part-buy shared ownership homes from housing associations.”

Sarah Webb, CIH chief executive, says: “There is a clear need for better mortgage lending. However, the proposals in this consultation will prevent many households who could service a mortgage from realising their aspirations to become home owners. Furthermore there is a real risk that these measures will undermine what is already a weak housing market – putting jobs and homes at risk. This isn’t just a case of closing the door once the horse has bolted, this will make matters worse.”

Elizabeth Richards, Head of Legal & Policy at NFoPP, comprising both the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA), comments:

"These proposals may seriously undermine the mortgage market. The National Association of Estate Agents (NAEA) attributes the decline in both buyers and sellers during the past few months to restrictive lending criteria. These new regulations have the potential to exacerbate this problem. Loans to first-time buyers are considerably lower than at this time last year, and the NAEA believes that these new proposals will prevent even more people from buying a home."

Jonathan Fair, Chief Executive of Homes for Scotland commented: “In its efforts to create a mortgage market that is sustainable for customers, we believe that the FSA proposals take regulation too far and could result in a market with fewer participants, less competition and less choice at a higher price for customers. We fear that the proposals could be damaging to customer’s housing choices and to the economy more generally, perversely at the very time where all other public policies are being driven to improve these conditions”.