Mortgage competition must be tackled in Pre-Budget Report

Mortgage competition must be tackled in Pre-Budget Report

30 November 2009 / by Rachael Stiles

The Association of Mortgage Intermediaries is calling on the Chancellor to tackle the lack of competition in the mortgage market within his Pre-Budget Report.

In the Pre-Budget Report, the AMI hopes to see a review of the current stamp duty process and measures to improve competition in the mortgage market, making it easier for people to get a home loan.

Robert Sinclair, director of the AMI, said that because intervention from the Government has resulted in a consolidated mortgage market – where six lenders account for approximately 90 per cent of the mortgages being written – it should take steps to rectify the problems in the market.

"This artificial restriction on competition has meant lenders have kept new product costs high and some groups of consumers have been punished. It is essential that the Pre-Budget Report sets out plans to address these issues," he said.

In order to increase competition amongst mortgage lenders, building societies and non-banking institutions need to be encouraged back into the market, Mr Sinclair suggests, and the Government should extend the current holiday on Stamp Duty as "an urgent requirement" until the housing market has showed stronger signs of recovery.

Stamp Duty places a "disproportionate burden" upon those looking for a first time buyer mortgage, Mr Sinclair explained, because many are unable to extend their borrowing to cover the additional cost.

Potential first time buyer mortgage customers need to be given greater incentive to get on the property ladder, such as shared ownership schemes, because helping first time buyers can "revitalise the market," he believes.

Meanwhile, the current Mortgage Market Review – which could see the FSA take a more prominent role in regulating mortgage lending, particualrly in the buy to let mortgage sector – should not completely remove the responsibility of consumers for their own financial decisions.

The AMI agrees with the proposal to pass responsibility for regulating second and subsequent charge mortgages to the FSA.

Commenting on the proposals, Mr Sinclair said: "There is a real danger that the FSA will create a regime in which consumers feel they need to take no responsibility for their own financial decisions and consider borrowing to be risk free. The Government should re-examine the MMR proposals which concentrate on the 5% of the market who exhibit less favourable characteristics."

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