LONDON (Reuters) - Proposed controls on mortgage lending in Britain are too restrictive and would lock out many would-be buyers from the housing market, the Council of Mortgage Lenders said on Tuesday.
Half of all mortgages approved in Britain between 2005 and 2009 would have been blocked if lending curbs proposed by the financial regulator had been in force at the time, said the CML, which represents home loan providers such as Lloyds (LLOY.L), Barclays (BARC.L) and Nationwide.
About 3.8 million home loans advanced by banks in the four years to March 2009 would not have been allowed, showing the proposed restrictions are too onerous, according to the CML.
“The current proposals sacrifice far too many borrowers and do not chime with our recent research on the levels of consumer aspiration to become homeowners in the future,” the CML said.
Britain’s Financial Services Authority said in July it wants banks to check prospective borrowers’ income and spending before approving loans, and also proposed an outright ban on self-certification mortgages — dubbed “liar loans” — where no proof of income is required.
The restrictions are aimed at preventing reckless mortgage lending, after a build-up of bad loans contributed to the banking sector’s problems during the financial crisis.
“Our proposals are designed to address the major failures that have occurred in the mortgage market and we are actively consulting with all stakeholders to ensure we get the right solution,” the FSA said in a statement, responding to the CML.
Reporting by Myles Neligan; Editing by David Holmes