The FSA's announcement this week that it plans to implement further restrictions on mortgage lending has been met with a mixed reaction from the industry.
Some commentators have interpreted a proposal for mortgage lenders to require verification of every borrower's income, to prevent them from borrowing outside of their means, as an outright ban on self certified mortgages.
Hannah-Mercedes Skenfield, mortgage expert at moneysupermarket.com, said that self-certified mortgages have offered a line of lending to the newly self-employed, but that, during the mortgage boom, this method of lending saw mortgage providers become "too lax" in applying the same relaxed criteria to other borrower's loans.
Rather than changing the mortgage process for most current borrowers, Ms Skenfield said that these new measures – proposed now that self-cert mortgages have almost disappeared from the market anyway – are intended to "protect us from the next mortgage boom".
National debt charity The Consumer Credit Counselling Service has welcomed the ban on self-certified mortgages; "the ability to prove you can repay a mortgage is an essential guard against reckless lending," it has responded.
Malcolm Hurlston, chairman of CCCS comments: "Banning self-certified mortgages, and adding increased protection for those with a history of debt problems, will help inform these decisions and prevent people from being sold a home they cannot afford."
Meanwhile, the Association of Mortgage Intermediaries has had a different reaction, urging the FSA to consider "the unintended cumulative consequences of these reforms."
While the AMI supports measures to ensure lending is affordable, its concerns are that the measures will exclude existing and future mortgage borrowers from access to finance.
Robert Sinclair, director of the AMI, said: "We are concerned that FSA has not selected the most appropriate affordability remedies to provide measured results," and that "The costs to firms will be significant and these will have to be passed on to consumers."
The Intermediary Mortgage Lenders Association also questions whether the FSA has given sufficient consideration to the potential consequences.
The FSA "has taken regulation into uncharted territory with unknown consequences for the shape and effectiveness of the UK mortgage market," said Peter Williams, executive chairman of the IMLA, who argues that the measures could go too far in limiting the accessibility of mortgages.
He added, "By 2012 the UK mortgage market could be unrecognisable and with unknown consequences. This really is a step into the abyss."
© Fair Investment Company Ltd