The Financial Services Authority believes you need protecting from yourself. That is the implication of the draconian reform of the mortgage market it unveiled yesterday. Never mind that the Treasury and the Bank of England have spent all year begging the banks to lend more in the way of home loans – the FSA thinks they should be lending less.
By imposing a blanket ban on products such as self-certificated mortgages, the regulator is making a statement about its view of the housing market. It clearly doesn't trust lenders to make advances in a responsible fashion. And it doesn't think borrowers are capable of behaving responsibly, either.
In fact, much of the higher-risk behaviour the FSA now seeks to curb came to a sudden stop months ago. Just one lender now offers self- certificated loans, and if you've recently tried arranging a mortgage with anything less than a 10 per cent deposit, you won't have enjoyed much in the way of choice.
Anyway, the idea that the UK is awash with a flood of dodgy mortgages is plain wrong. Just look at the repossession statistics. Some 24,000 people lost their homes in the first half of the year, with lenders predicting that the total will rise to 65,000 over the course of 2009 as a whole. That's not good news of course, but the totals remain well below the 90,000 homeowners who were losing their properties each year at the height of the early Nineties recession.
With unemployment on the rise, you would expect greater numbers of people to be losing their homes. But the repossession statistics – or, for that matter, the underlying figures on arrears – do not suggest that years of mis-selling of mortgages to customers who were never going to be able to afford the repayments are now coming home to roost.
There are some trouble spots. The arrears rates on buy-to-let loans, for example, are higher than on conventional mortgages, and the FSA is right to say that this one remaining area of the market beyond its supervision needs to be regulated.
Similarly, there have been exposés of bad practice on self-certificated mortgages, but ban the dishonest advisers telling clients to lie on their mortgage applications rather than the products themselves, which are useful to certain types of borrower.
One of the weaknesses of regulation is that every problem that crops up is perceived as the fault of capricious financial services companies who like nothing better than to pull the wool over their customers' eyes. In the case of the mortgage market, however, borrowers were willing participants in the housing boom. They must take responsibility for their own actions, and the evidence is that most people have always done so.Reuse content