It is expected that the chairman of the FSA, Lord Turner, will suggest a cap on mortgages and a ban on 100% mortgages in his review to be published tomorrow.
In a plan to move away from the “light-touch” style of regulation that has been blamed for letting the banking crisis spiral out of control, the FSA could limit how much lenders give to homebuyers. Ushering in a new age of strict regulation and sensible lending, mortgages could be restricted to just three times a borrower’s annual salary.
However, industry experts have expressed alarm at the proposals, saying that further restrictions is not what the crisis-stricken housing market needs right now.
The former president of the National Association of Estate Agents, Trevor Kent, has branded the plan “suicidal” and said it would make property prices slide further. “Lenders are already reluctant to lend, and this would give them an excuse to put up another hurdle, stopping buyers getting access to finance.” He said.
Melanie Bien, of mortgage broker Savills, added: “If you insist on putting a limit of three times salary, you will end up with as a subdued market as you have now. Prices will have to come down even further for first time buyers to afford a property.”
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