In its response to the FSA’s responsible lending consultation, the BSA demanded the government get involved before the regulator presses ahead with its proposals, which it believes will have far reaching consequences for the wider economy.
Paul Broadhead, head of mortgage policy at the BSA, said: “It is for the government to provide a clear plan of their housing policy objectives. It will then be imperative to assess whether regulatory proposals facilitate the desired outcomes for UK consumers or present further obstruction.”
He added: “It is not the role of appointed regulatory officials to determine the shape of such a major part of the UK economy, nor is it their role to attempt to control demand through prescriptive and restrictive conduct of business rules.
“This is the role of elected representatives and we would urge the government to make this debate a priority.”
In addition, the Mortgage Market Review proposals on responsible lending could heavily impact upon competition and diversity within the mortgage market at the expense of mutuals, Broadhead said.
“Mutual lenders have a good track record of responsible lending but many of the proposals are a one-size-fits-all approach, which attempt to shoehorn mutuals into large bank processes,” he said.
“Competition and diversity are of vital importance to ensure a sustainable and vibrant market, which offers choice for consumers. A market dominated by a small number of large banks is not desirable in the long term and does not meet the FSA objectives of a sustainable and flexible market,” Broadhead said.
