FSA mortgage proposals risk exacerbating already acute housing crisis

16 November, 2010

Organisations from across the housing industry today warned of the dire consequences of the FSA’s proposals to change mortgages regulation.

The FSA’s proposals, the consultation which closes today, would be so onerous and overly-prescriptive 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 and have far reaching social and economic impacts. They would  also see house building levels, already at an 80 year low, drop still further.

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”.

Click here to view the letter sent to George Osborne

For media enquiries, or to arrange an interview, please contact Steve Turner on 020 7960 1606 / 07919 307 760 or steve.turner@hbf.co.uk

Jennifer Kennedy, Homes for Scotland – 0131 455 8350 / 07763 240694

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Notes to Editors:

The Home Builders Federation (HBF) is the representative body of the home building industry in England and Wales. The HBF’s 300 member firms account for some 80% of all new homes built in England and Wales in any one year, and include companies of all sizes, ranging from multi-national, household names through regionally based businesses to small local companies: www.hbf.co.uk
The National Housing Federation represents England's housing associations - http://www.housing.org.uk/

The Chartered Institute of Housing (CIH) is the professional body for people involved in housing and communities. We are a registered charity and not-for-profit organisation. We have a diverse and growing membership of 22,000 – both in the public and private sectors – living and working in over 20 countries on five continents across the world. Our members work for local authorities, housing associations, Arms Length Management Organisations, Government bodies, educational establishments and the private sector. Many tenants and residents are also members. We exist to maximise the contribution that housing professionals make to the wellbeing of communities. Further information is available at: www.cih.org

The New Homes Marketing Board (NHMB) was established in 1982. It promotes the need for new housing to the general public and raises awareness of the benefits of new homes. It also campaigns on behalf of buyers on a range of consumer related issues - particularly for first time buyers.

Homes for Scotland (www.homesforscotland.com) represents the country’s home building industry which, prior to the onset of the credit crunch was the largest source of private investment in Scotland and the largest user of the planning system For up-to-date market commentary, visit www.homesforscotland.com or follow us on Twitter at http://twitter.com/H_F_S.

About the NFoPP
Based in Warwick, the National Federation of Property Professionals and its divisions have a combined membership of just under 14,000. The NAEA and ARLA are the UK’s leading professional bodies in the sales and letting sectors of the property market.
Our over-arching aim is to promote the highest standards of professionalism and integrity among those working within the property industry, and to encourage members of the public to proactively seek out our members when involved in any kind of property transaction.
About the NAEA
The National Association of Estate Agents (NAEA) is the UK’s leading professional body for estate agency personnel, representing the interests of around 10,000 members who practice across all aspects of property services both in the UK and overseas. These include residential and commercial sales and lettings, property management, business transfer, auctioneering and land. The NAEA is a sister organisation to the Association of Residential Letting Agents (ARLA), as is PropertyLive.co.uk, the UK’s only regulated property portal.

The NAEA is dedicated to the goal of professionalism within all aspects of property, estate agency and land. Its aim is to reassure the general public that by appointing an NAEA member to represent them they will receive in return the highest level of integrity and service in both sales and lettings, for all property matters. Both NAEA and ARLA members are bound by a vigorously enforced Code of Practice and adhere to professional Rules of Conduct. Failure to do so can result in heavy financial penalties and possible expulsion from the Associations. For further information contact: NAEA PRESS OFFICE Tel: 020 3128 8181 E-mail: press@nfoppmedia.com