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
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links