Mortgage Regulation

Lord Walney Excerpts

Monday 17th January 2011 Commons Chamber

[Mr Robert Syms (Poole) (Con)]

I intend to speak about the future of the mortgage market and, in particular, the current proposals by the Financial Services Authority in its “Mortgage Market Review”. When it was announced, Lord Turner said that it was a “major shift” in the FSA’s “willingness to intervene”. It is a serious review. If it listens to representations, as I hope it will, and is light touch, it will improve the market, but if it goes the way of some of the proposals that are being consulted on, it could have a profound and bad effect not only on the economy, but on the prospects for many of our constituents. I shall touch on those issues today and canter round some of the concerns.

The Council of Mortgage Lenders, the Building Societies Association and many other organisations are very worried about what the FSA is consulting on. We must therefore treat seriously the prospects and the proposals put forward. I support the objectives of the FSA, which are to create a mortgage market that is sustainable for all participants, and a flexible market that works better for consumers. However, 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 not to focus its attention on fixing the wrong problem.

Despite the economic slowdown, FSA arrears statistics show that the overwhelming majority of mortgage borrowers in the UK are able to continue to make their mortgage repayments. The current low level of interest rates is a major help in this, but the statistics demonstrate that the vast majority of lenders have acted responsibly and have been positive and sympathetic to customers in difficulty. In a sense, the mortgage rescue scheme introduced by the previous Government towards the end of their term of office did not help many people, but it pointed many people with difficulties to their lender. That meant that their lender could deal with the problems. One of the good things emerging from the difficulties that we face is that a far more responsible attitude is being taken by many lenders.

I believe that it is desirable to have a market based on consistent, responsible lending and borrowing. However, the market failures that the MMR is designed to address affects only a small number of lenders that were in the market. Some of those are no longer active.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

Does the hon. Gentleman recognise that some of the smaller lenders, such as the Furness building society based in my constituency—lenders who were not rogues, did not play fast and loose, and were always responsible—feel disproportionately penalised by the proposals currently on the table?

[Mr Syms]

I agree. One of the important things about the proposals is not always to focus on the five big banks but to ensure that there is a diverse mortgage market that includes many smaller building societies. I shall touch on that issue in a moment.

A measured and well-considered response from the Government, the regulators and the lenders is necessary to prevent an inefficient and unsustainable mortgage market. The current proposals will have a far-reaching effect on the wider economy, but the FSA’s impact assessment does not consider those wider consequences. They should be considered, because housing is an important component of our economy.

There are also fundamental concerns about many proposals that transfer responsibility away from the consumer and to the lender. We appreciate the lender’s responsibilities to verify application information and to have appropriate controls in place, but that must be balanced with the capability of customers to make sound financial decisions for themselves. The proposals do not achieve a balance; they take the very patronising view that customers need protecting from themselves—a view that could be insulting to many mortgage borrowers. In my experience, the people who get most upset are those who are refused a mortgage, a loan or some help from a bank. People take that personally, and if we are not careful, we will exclude many people from gaining access to finance.