Speaking at the Treasury Select Committee hearing this morning, Bailey said this was one of two solutions which he could see helping to solve the mortgage prisoners situation.
Labour MP Rushanara Ali quizzed Bailey on whether he would recommend a government fund to prevent people who remained unable to remortgage or switch lenders from losing their homes.
Bailey said he would not comment on what government should and should not do, but that the proposal needed “to be taken seriously”.
He agreed that there would be a portion of the mortgage prisoner population that will not benefit from the consultation and suggested that a second option, to help them, would be greater regulation.
“We have to take seriously extending the regulatory perimeter and saying that mortgage lending should be a regulated activity,” he said.
“That would allow us to make rules in that space. I don’t know of another solution to this, honestly.
“We do authorise mortgage administrators but I don’t think it works to go through that channel in the way we would both probably want to achieve.”
Bailey said he had “not had that conversation with treasury yet”, about widening regulation of mortgage lending.
Treasury Select Committee chairwoman Nicky Morgan added: “We might have that conversation for you.”
Implementation depends on Brexit
Bailey also reiterated his expectation that the affordability rule changes would be implemented by the end of the year, but added that this could be dependent on if and how Brexit was undertaken.
“We’ve said will do it by end of the year,” he said.
“We are somewhat in the gift of Brexit in the autumn, but we will push things through as fast as we can.”
He defended the 13-month term given to mortgage book holders to inform affected borrowers, saying that he wanted it to be done quicker, but that it could be challenged on it otherwise.
“We will do it faster. I don’t want to end up in a judicial review as that will punt it out longer,” he said.