According to Mr Coogan, there are numerous reasons behind the constriction of mortgage lending, including the fact that there are fewer lenders out there as wholesale funded lenders and building societies withdraw deals to new customers.

However, despite recent attempts to stimulate the economy through interest rate cuts and speculated further cuts tomorrow, more action is required to boost the mortgage market and abolish mortgage rationing, Mr Coogan said.

In fact, Mr Coogan argued that, “the Government’s call for base rate reductions to be passed on to standard variable rate borrowers has been both short-sighted and counterproductive – they should recognise the unintended consequences of their comments.”

As the base rate falls, so too do savings account rates continued Mr Coogan, reducing the amount of money invested and, consequently, available to mortgage lenders to re-lend.

Addressing the issue of an increase in arrears and repossessions as Brits contend with job losses and higher costs, he added that “Mortgage rescue is key. We must find a way to avoid cases going through the court process, with forced sales and rapid house price falls affecting repossessed properties.”

The concerns raised by Mr Coogan highlight a need for further action by the Government, he concluded: “If the UK economy fails to meet these challenges in a tough recessionary environment, then we will all end up worse off.

“That must not happen, but requires effective coordination by tripartite authorities and the industry in a way that has never been seen before.”

And, as pressure mounts on mortgage lenders to play fair when it comes to arrears and rates, the FSA’s John Pain spoke of the need to treat customers fairly as the UK economy begins a downturn.

Speaking at the CML’s annual conference yesterday of FSA collaboration with the CML, Mr Pain said: “It is particularly important that you focus on the fair treatment of your customers when they go into arrears. We want each lender to look at their internal arrears policy to ensure it aligns with the mortgage rules and treating customers fairly.”

Mr Pain also addressed the issue of tracker mortgage rates and the use of a ‘collar’ which prevents the lender’s rate from falling below a certain level, despite the base rate falling.

According to Mr Pain, although collars are allowed, they must be clearly set out in the lender’s Key Facts Illustration (KFI), unlike Halifax, which, according to today’s reports, removed the mention of an existing collar on tracker mortgages from it’s KFI’s in 2005.

Commenting on the future of the UK’s mortgage market, Mr Pain concluded: “Now is the right time for us to address the big issues, and I believe we have a market with the CML that is willing to take an open mind and collaborate with us, learning from the past, and making sure that we get a more sustainable market in the future.”

© Fair Investment Company Ltd