LONDON (Reuters) - The head of the Financial Services authority warned on Wednesday that the age of cheap credit may be over.

In an interview on BBC radio, Hector Sants said he did not think financial markets would return to where they were before the global credit crunch which has caused turmoil across world markets in recent months.

"I don't think markets are ever going to return to the way they were," Sants said. "The idea that at some point they will go back to normal, I think, is a misnomer.

"The new normal will be different from the way that markets behaved in the past."

Sants said he believed banks would revert to more old-fashioned and straightforward ways of lending, and would retreat from more complicated products which allow them to package and sell on cheap loans.

"We still believe that that will be doable, but probably using simpler and more understandable vehicles which investors who are buying this dispersed risk can have greater confidence in," he said.

This, he said, could mean the costs of borrowing for consumers was likely to rise.

"If we do see ... as is generally forecast, a deterioration in the real economy, consumers will find paying their financial obligations more difficult than they were in the past," he said.

Sants also stressed that banks and financial firms must be as rigorous as possible about not mis-selling products and ensuring consumers genuinely understood what they were getting.