Conservative MP for Poole Robert Syms brought the debate to the House and told Financial Secretary to the Treasury Mark Hoban that the FSA had failed to consider the impact of the proposals on the wider economy.
Syms argued that the MMR was designed to address the market failures of a small number of lenders, some of which are no longer active.
In addition, he said that it patronised consumers by placing too much responsibility on lenders, and would negatively affect first-time buyers, innovation and competition among lenders.
While he said he supported the FSA’s objectives of achieving a sustainable and flexible market, Syms said: “It is crucial that the FSA recognises that, in the context of the current financial crisis, problems in the European and UK economies today are primarily the result of liquidity and structural issues arising from global financial markets.
“They are not a result of a dysfunctional and widely irresponsible residential mortgage market. The FSA should be mindful that it is not focusing its attention on fixing the wrong problem.”
However, in responding to several MPs concerns, Hoban said there has been a lot of “misinformation” about the MMR and that the review was vital to address the failed regulation of the mortgage market prior to the financial crisis.
He said: “The FSA has made it absolutely clear that it will assess fully the potential impact on the market before implementing any rule changes. Later this year, it intends to publish an impact assessment that will take into account the cumulative impact of all its final proposals.
“The FSA is also committed to ensuring a smooth transitional period, to minimise the impact of changes and keep the mortgage and housing market stable. It has made it clear that it will not implement any rule changes until the market is back on a stronger footing.”
Hoban said that the MMR’s emphasis on affordability would in fact help first-time buyers in the long run by creating a stable market and stable house prices.
Hoban concluded: “The MMR is an essential step to ensure that both consumers and lenders are protected, but that will always be balanced with the need to ensure innovation and competition in the mortgage market. The FSA will take a proportionate and balanced approach in order to help to build a stable and sustainable mortgage market for the future.”
