Watchdog delays controversial reforms of mortgage market

The Financial Services Authority delayed its controversial mortgage reforms yesterday and admitted its attempts to protect borrowers risked restricting lending too much.

Lord Turner, the FSA's chairman, told the watchdog's annual meeting that the Mortgage Market Review (MMR), due this summer, would not now be published until early autumn.

He said: "The more that a regulator seeks to intervene in defence of consumer interest, the more that the regulator is then making crucial trade-off choices on behalf of society, and such trade-offs are never purely technical, but judgemental and political with a small 'p'."

The FSA's review was meant to protect consumers against a repeat of bad practice by lenders during the housing boom that left borrowers saddled with mortgages they would almost certainly not be able to pay.

But lenders and housebuilders reacted with fury to the proposed clampdown. The Council of Mortgage Lenders (CML) claimed the proposals would have banned 4m existing mortgages, 95 per cent of which were being repaid.

Lord Turner said yesterday that deciding whether to protect 15 per cent of borrowers who may default while stopping the other 85 per cent from taking on a tough but affordable commitment required more work.

"That is a question which deserves wide-ranging debate, as best possible to forge a social consensus.

"It is not a question which a regulator can resolve on the basis of technical analysis alone.

"The analysis required to enable an informed debate on this issue needs to be of the highest quality and clearly presented," he added.

The CML said it was not surprised that the FSA had been forced to delay the review.

Michael Coogan, director general of the CML, said: "We are pleased that the FSA wants to take time to get it right. The regulator has already indicated that it will be cautious about implementing change while the mortgage market recovers.

"The current muted state of the market presents no regulatory threat, so there is no need to rush."

Lord Turner also promised that the FSA's report into Royal Bank of Scotland's near-collapse would pull no punches on the watchdog's "woefully deficient" regulation of the bank.

Like the MMR, the report, which was originally due in March, will now appear in the autumn.

Lord Turner said the report would cover the FSA's own supervision of RBS as well as the actions taken by the bank's former chief executive, Sir Fred Goodwin, and his team. It will also look at the watchdog's decision not to punish Sir Fred and other bankers.

But he admitted that if the FSA had regulated RBS properly the bank would not have failed, even with the disastrous acquisition of ABN Amro, reckless commercial property lending and packaging up US mortgages.

"We were allowing banks to run with totally inadequate levels of capital," he said.

He said the FSA's report on its mistakes over Northern Rock was "the most rigorously self-critical" review he had seen by any regulator.

He promised a similarly frank account of the RBS debacle and called on the Government to make it easier for the watchdog to publish public reports while legal action was taking place.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral