House builder protests over the Mortgage Market Review may finally be getting through after the Financial Services Authority today revealed it would make a key concession on new lending rules.
Publishing its business plan for 2011/12, the FSA appeared to break from proposals for a fixed 25 year term for assessing affordability.
In a statement setting out its priorities for the coming year, the soon to be scrapped body acknowledged the measure “may not be appropriate given the range of different individual circumstances”.
A Council of Mortgage Lenders spokeswoman told CN it “welcomed the news” and housebuilders said the announcement was “extremely welcome”.
A senior source at a major housebuilder said: “This proposal would have further constrained mortgages at a time when mortgage finance is already under enormous pressure and would have been particularly bad for first time buyers.
“It is a step in the right direction that they are taking a step back from this.”
The FSA confirmed it would continue to consult on the MMR proposals, confirming plans to publish a cost benefit and impact analysis of a full package of proposed rules in the summer.
It will follow up with its final package of rule changes early in 2012.
The FSA statement said: “In reaching its conclusions, the FSA will seek the right balance between protection for consumers, sustainability of the market and consumer choice. The FSA is particularly conscious of the need not to take a “one size fits all” approach and the importance of balancing the advantages of simplicity against those of flexibility.
“The FSA nevertheless remains focused on ensuring that the new regime includes a robust assessment by the lender of the affordability of the loan for the individual, both for interest only and repayment loans. It is not the FSA’s intention to ban interest only loans which undoubtedly for some consumers represent an appropriate method of finance.
The news came ahead of tomorrow’s budget, widely expected to contain a package of “sweeteners” to help stimulate house building.