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Saturday 19th of June 2010
June 17, 2010    

Mortgage supply at risk in FSA break up

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by Gill Montia
”Mortgage

The news that the Financial Services Authority (FSA) is to be broken up could have an impact on the availability of high loan-to-vale mortgages, already scarce in the market.

Chancellor of the Exchequer, George Osborne, has announced that the key role of regulating the UK financial sector is to pass to the Bank of England.

The change involves FSA operations that monitor financial institutions becoming a subsidiary of the Bank, which is setting up a Financial Policy Committee to oversee the activities and balance sheets of banks and other lenders.

In its new role, the Bank of England will be keen to avoid another housing market bubble fuelled by the kind of irresponsible lending seen before the credit crisis.

The Committee could therefore restrict lenders’ offerings by, for example, banning 100% LTV and high income multiple deals, should they be deemed to be detrimental to the wider economy.

Earlier this week, the Council of Mortgage Lenders reported that first-time buyers are still locked out of the mortgage market by a lack of high LTV deals and lenders’ demands for high deposits.

First-time buyer mortgage advances accounted for only 35% of all house purchase loans in April 2010, the lowest proportion since September 2007.

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