Minister issues warning on mortgage shake-up

Nicky Burridge,Pa
Wednesday 12 January 2011 11:15

The Housing Minister will today step up the pressure on the City watchdog not to impose tough new mortgage rules which could make it harder for first-time buyers to get on to the property ladder.

Grant Shapps is due to meet the head of the Financial Services Authority, Hector Sants, for an update on the regulator's controversial mortgage market review.

The proposed new rules are causing concern among lenders, housebuilders and first-time buyers as it is feared they could make it even more difficult for people to get a mortgage if they are implemented in their current form.

Mr Shapps will use the meeting to renew his call for a more stable housing market, without the booms and busts seen in the past, so that young people who want to buy their own home are able to do so.

But he will also warn that the new rules must avoid exacerbating an already difficult situation for would-be buyers.

He is also expected to call for the mortgage market to be open and competitive, rather than "locked down by micro-management".

He has previously warned that thousands of buyers could be locked out of the property market under the new regime, leading to steeper house price falls.

He has also claimed that, under the rules, he would not be able to get a mortgage on his home, despite being a well-paid minister in his 40s.

Mr Shapps said: "Too many young people now feel getting a foot on the housing ladder is not something they can aspire to.

"The average age of a first-time buyer without the financial assistance of parents has risen to 37 - and I don't want to see this increase in the future.

"So I will continue to direct my efforts towards creating a stable housing market, but also one where prospective homebuyers across the country do not see their aspirations curtailed by red tape."

The new rules are being put forward by the FSA in a bid to ensure banks can never return to some of the lending practices that were seen in the past.

They include tough affordability and income verification checks on borrowers, while lenders would also have to make sure people with interest-only mortgages had a way of repaying their loan at the end of its term.

But the Council of Mortgage Lenders has warned that around 45% of people taking out a mortgage during the past year would have been hit by the new measures if they had already been in force.

The group claims that the rules also fail to take into account the fact that banks and building societies have tightened their lending criteria significantly in the wake of the credit crunch, with borrowers now needing deposits of 40% to qualify for the most competitive rates in many cases.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments