Mortgage restrictions 'to be discussed' following FSA report

19/03/2009

The Financial Services Authority (FSA) could soon crack down on the mortgage market, in order to discourage cheap loans being given to unsuitable customers.

Lord Turner, the regulator's chairman, released a new report on the way the FSA would work in future yesterday.

In it, he signalled that mortgage loans with high loan-to-value ratios, including deposit-free or "100 per cent" mortgages, could soon be outlawed.

Previous reports had suggested that the FSA would announce that mortgage loans would be limited to three times the borrower's earnings.

However, no firm commitments were made by the regulator, which proposed instead that the issue be discussed within the industry before a decision was made later this year.

Over-generous mortgage lending to customers from banks has been seen by some experts as a major cause of the credit crisis and financial downturn in the UK.

The Council of Mortgage Lenders (CML) yesterday welcomed the prospect of discussing the matter.

Michael Coogan, CML director general, commented: "We welcome the opportunity to explore the pros and cons of limitations on products in a rational way. And we agree that this needs to be done alongside an assessment of alternative ways of regulating to achieve the same risk-mitigating objectives."

Tags; Housing Debt and Bills, Young Family Finances,

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