The Housing Minister, Grant Shapps, says he himself would have failed to get a mortgage had new proposals for the mortgage market drawn up by the City watchdog been in effect when he bought his home.
Speaking at the National House-Building Council's annual lunch, Mr Shapps said: "I think it was about the moment I realised that I wouldn't have a mortgage if the Mortgage Market Review (MMR) changes went through that I kind of thought that this might be going a step too far."
He continued: "There is no point in closing the door after the horse has bolted. The whole problem with the mortgage market wasn't a pernickety thing about whether you could lend X or Y to a person, or what form you had to get a borrower to sign. It was because there was a lack of effective central regulation on how the banks were operating." He added that "What's required here is proper, sensible top-level regulation – not pernickety down-in-the-dirt what can you do what can't you do as a mortgage company."
He told his audience that he hoped that the Financial Services Authority (FSA) "will be getting that message from you and everyone else. They are of course independent, but I think it's very important that we learn the lessons of the past without repeating them – which is what they are in danger of doing."
The FSA has said that the reforms proposed in the review, which would demand that banks undertake strict "affordability" tests before advancing loans, were prompted by widespread examples of cavalier lending in the run-up to the credit crunch. Critics have said the FSA's prescription for dealing with the problem is an over-reaction. Mr Shapps's remarks represent the first time that a minister has commented publicly on the increasingly controversial review, which the Council of Mortgage Lenders (CML) has said would have banned half of all the mortgages advanced in the last five years – amounting to some 4m home loans, 95 per cent of which are being repaid as due.
Mr Shapps, the Conservative MP for Welwyn Hatfield since 2005, holds minister-of-state rank as Housing minister, one rung below the Cabinet. He also oversaw the portfolio as a shadow minister in the last parliament, and is regarded as close to David Cameron, whose nomination papers he seconded.
Housebuilders, led by Redrow, have been loudly voicing their concerns, warning that a lack of mortgage finance is crippling their businesses at a time when Britain needs hundreds of thousands of new homes to house its growing population. Mr Shapps's intervention suggests that their message is finally being heeded.
Yesterday Sue Anderson, spokeswoman for the CML, said of Mr Shapps'comments (made in a question-and-answer session): "We really welcome this. One of the big things that we have been saying is that we felt ministers needed to be part of this debate. It is too important to leave it with the FSA as a technical issue. It comes with a huge range of social issues."
The FSA has been increasingly on the defensive over the review. Lord Turner, its chairman, reiterated before the Treasury Select Committee earlier this week, that the sort of cheap and easy credit available during the run-up to the financial crisis should not be seen as a good thing.
A spokeswoman for the FSA said: "We have constantly said that we are listening to people's views. This is a consultation, and we are interested in hearing from all interested parties."