by Mark Johnston
One of the UK’s leading home builders, Redrow have responded furiously to claims by the City regulator that they created a mortgage famine. At the same time, the trade body, the Council of Mortgage Lenders (CML) asked the Financial Services authority to reconsider their new mortgage regulations as they believe that the new rules will result in tens of thousands of people not being able to get a new mortgage.
The is unrest seems to be building as more concerns are raised in response to the FSA’s hard line stance on mortgage industry reform. The chairman of Redrow, Steve Morgan spoke out during the company’s annual general meeting and suggested that the reform could kill off the industry.
Mr Morgan said: “Our message to the Government is simple: the regulators are going too far,” said Mr Morgan. “Deliberately suppressing housing demand at the very time that the country has a chronic housing shortage is laying the foundations for the next boom/bust cycle.”
The Redrow chairman suggested that he had never seen the mortgage market in a worse state in his 30 years as a home builder. He went on to say: “. “We are not asking for irresponsible lending and I don’t think the regulator means to pull apart the housing market. But the effect of what they are proposing will be that that is exactly what will happen,”
The housing firm is said to only be outputting fifty percent of its capability, apparently they are having to turn away customers looking for a new home because they cannot get a mortgage. Mr Morgan explained that both him and his own son took out 95% mortgages to be able to purchase their first houses he was concerned that this was no longer possible and that finding such large deposits was unrealistic. He explained: : “In the last three years the number of mortgage products available to buyers with deposits of 5 per cent or less has fallen from 1,224 to just 33. The situation could get a whole lot worse if the FSA’s proposed changes in its Mortgage Market Review come to fruition.”
The Council of Mortgage Lenders released two reports that which suggested that the new rules would hurt the industry further instead of trying to rebuild it following the financial crisis. The head of the Council of mortgage lenders, Michael Coogan asked for the FSA and government to reconsider their plans and revisit the rules by consulting the industry again as part of the Mortgage review. Mr Coogan called for free access to the market for responsible lenders he went on to say: “establishing an effective safety net for the few who have difficulties due to changes in their lives. This is not the approach which the FSA has taken due to its limited focus on its conduct risk strategy.”
The FSA responded by saying: “We think that much of what we are proposing is consistent with how lenders themselves have already tightened up their procedures … No doubt this is why our proposals have been characterised by a number of firms as simply marking a return to ‘sensible underwriting’ and common sense. We continue to welcome and review all feedback we receive and we have already indicated we will not rush into change without fully assessing the impact of our proposals on the mortgage market.”
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