Watchdog reviews mortgage provision
The City watchdog is set to point out which areas of the mortgage market it thinks needs improving, it has been revealed.
The Financial Services Authority (FSA) will discuss aspects of its Turner Review relating to the mortgage market before it publishes a paper later in the year on the future shape of regulation.
The regulator has already admitted that it is thinking about putting a limit on the amount homeowners can borrow relative to their income or the value of their home.
This comes after the authority previously put some of the blame for the current economic crisis on the high loan-to-value ratios and loan-to-income ratios, which led to a rapid expansion of mortgage lending in the UK.
FSA chairman Lord Turner will discuss how to put into practice some of the Turner Review recommendations, while director-general of the Council of Mortgage Lenders, Michael Coogan, will highlight what lessons can be learned from the past.
Financial Services Secretary to the Treasury Lord Myners will also provide an update on plans to address the current funding gap in the mortgage market, caused by the wholesale money markets drying up.
And the conference will look at the way mortgages are sold, and the impact this has on consumers.
The mortgage market has been hit hard by the credit crunch, which has deprived lenders of a vital source of funding and left them increasingly reliant on using customers' deposits to fund mortgage lending.
Lenders have responded to the current problems in the mortgage and housing markets by tightening their lending criteria and demanding increasingly large deposits from customers.
Around a quarter of mortgages now require a deposit or equity stake of at least 40%, and there are just four different deals available for people wanting to borrow 95% of their home's value.
The Council of Mortgage Lenders predicted that net lending, which strips out redemptions and repayments, would fall to minus £25 billion this year, meaning that customers would repay £25 billion more than they borrowed, although it has recently indicated it may revise this forecast.
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