The Financial Conduct Authority (FCA) has announced that it will conduct a study on the mortgage market early next year, something that it first mentioned in June.
The City regulator, which started a review into responsible lending in April, will specifically look at strict new rules introduced under the Mortgage Market Review (MMR) in spring 2014.
This will be one of three reviews over the next year.
FCA to Conduct Three Mortgage Market Reviews
Alongside the post-MMR responsible lending review, the FCA will provide a more general review of the mortgage market and a review into financial advice, including mortgage advice.
Under the MMR, mortgage applicants must now undergo affordability checks, including an examination of their spending habits and an assessment of their ability to keep up repayments if interest rates rise.
In a speech at the FCA conference in central London yesterday, Christopher Woolard, Director of Strategy and Competition at the FCA, says there have been questions over whether “those interventions might lead to a drying up of the market… The MMR alone was predicted to affect mortgage approvals by anything up to 20%.”
Instead, he revealed, mortgage approvals have grown.
He continued: “There is clearly a question here as to what the ideal level of activity is and how you achieve it.
“No one, frankly, wants to return to the unaffordable lending practises of the past, where almost every application was approved.
“We do, however, have to remain sensitive to the impact of these reforms over the long run.”
He said: “Even if we believe our rules are proportionate, we need to remain alert to how firms are interpreting them and the effect on consumers.
“That is why we will be undertaking a mortgage market study soon, which will include a review on key aspects of the implementation of the MMR.”
In the speech, Woolard also stated: “Few issues in the UK matter more to the general public than homeownership.
“As a nation, we consume huge amounts of information about property. We are borrowing more. And we’re spending increasing amounts of disposable income on homes.”1
He said that on one hand, homeowners are hoping house prices will rise, but on the other, first time buyers hope they will go down.