Watchdog 'treats mortgage lenders like drug dealers'

Published on Friday 13 November 2009 19:43

Matthew Wyles: 'In the UK mortgage market as a whole, default rates and losses have been modest'

THE City watchdog has been accused by mortgage lenders of treating them like "drug dealers at the school gates", with consumers the wanton children..

Speaking at the annual Council of Mortgage Lenders conference and exhibition yesterday, the council's chairman, Matthew Wyles, called on the Financial Services Authority (FSA) to rethink proposals for a mortgage market overhaul that the industry believes could have damaging unintended consequences.

In its mortgage market review, last month, the FSA outlined plans to ban self-certification mortgages, introduce strict affordability tests and make lenders fully responsible for checking the credit-worthiness of borrowers.

But Wyles, group distribution director at Nationwide, accused regulators of viewing consumers as children "who have a tendency to want what isn't necessarily good for them".

He went on: "Increasingly, I have the feeling that regulators see lenders and intermediaries as the sweetshop owners – or worse, the drug dealers at the school gates – of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes."

According to Wyles, consumers will be worse off if the FSA proceeds with the proposed ban on self-certification mortgages, typically used by the self-employed, freelance workers and those with seasonal income and some small businesses.

"Change is necessary, but plenty of self-cert borrowers are complicated rather than dishonest, and it is simply wrong to see all self-certs as 'liar loans'," he said. "A less blunt approach than an outright ban could still be adopted."

The reform of affordability checks would make the process of securing a loan slower and more expensive for borrowers, according to Wyles. He claimed that borrower repayment difficulties were more likely to result from changed circumstances, other credit commitments and events in the wider economy than from spending underestimates.

And Wyles cautioned against excessive protection for consumers, claiming that lending could not be risk-free.

"In the UK mortgage market as a whole, default rates and losses have been, and still are, modest – despite the severity of the economic downturn. Most of us must have been doing something right," he said.

But Jon Pain, managing director of supervision at the FSA, said its proposals would result in fewer unaffordable and unsuitable mortgages and would not restrict access to the market.

"Everyone who takes out a mortgage should be able to repay it – they should have some evidence that they can repay it and lenders should take note of that evidence," said Pain. "We want lenders to get back to the basics of responsible lending and we will continue to push the industry where we find firms are not treating their customers fairly."