UK and EU-led regulation has resulted in a layering effect in the UK mortgage market which could stifle people’s access to credit if it goes unchecked, Peter Williams has warned.
The director of the Intermediary Mortgage Lenders Association said that new rules could hit consumer choice and has called on the Bank of England to review the regulatory framework to identify unnecessary overlap and costs, and establish a joint industry panel to guard against excess rules.
“We must ensure that future regulatory changes bring genuine benefits that warrant their costs, and do not weigh too heavily on consumer access. Every new set of rules takes us further into unchartered territory and heightens the risk of unintended consequences,” he said.
A 17-page report, Regulatory Layering: Assessing the Cumulative Impact of New Financial Regulations, published by the body warned that the common objective of building a sustainable market was threatened by the volume of new rules, including the incoming EU mortgage credit directive.
The overlapping effect may unwittingly tip the balance too far away from consumer choice and positive outcomes, and the ability for people to access credit.
The report raised concerns over regulators’ potential “bias to action”, where they perceive a high cost to their reputation if they are seen to be too permissive, compared with a low risk of being too restrictive.
IMLA cited the financial policy committee’s decision in June 2014 to impose interest rate stress tests and limit high loan-to-income mortgage lending as an example.
Mr Williams said: “Getting the right balance between safety, efficiency and choice is the biggest challenge facing the UK market and it will take a collective effort to hit the mark.”
In February this year, the FPC was given further powers to cap loan-to-value and debt-to-income levels for mortgages.
Mike Richards, director of London-based Mortgage Concepts Associates, said: “The UK mortgage market does not need any further rules, especially from Europe, it has just absorbed the mortgage market review and is in a healthy position.”