Addressing Mortgage Market Issues Thursday, 10th December 2009

This is the view of the Director of AMI Mr Robert Sinclair: "Government intervention has resulted in a consolidated mortgage market, with six groups responsible for around 90% of mortgages written. This artificial restriction on competition has meant lenders have kept new product costs high and some groups of consumers have been punished. It is essential that the Pre-Budget Report sets out plans to address these issues. This should include the easing of capital and regulatory requirements for Building Societies and non-banking institutions to encourage them to re-enter the market place.

"Reform of the current Stamp Duty regime is an urgent requirement. The slab structure distorts the housing market with properties just above thresholds paying a significant amount of duty above that of properties just below them in value. Stamp Duty also places a disproportionate burden on first time buyers. Many are unable to extend their borrowing to cover the additional cost of stamp duty. The current holiday on the duty should be extended until the market has recovered. By helping more first time buyers onto the property ladder this extension can serve to revitalise the market.

"In order to help more first time buyers into the market, the Government should increase incentives around shared ownership schemes. Tax incentives for housing associations and builders to enable them to concentrate on more shared ownership developments should be introduced.

"The FSA's recent Mortgage Market Review (MMR) has severely underestimated the ability of the vast majority of people to make responsible decisions for themselves. Lending must be responsible, but consumers benefit from and appreciate lenders and intermediaries that treat them as adults.

"There is a real danger that FSA will create a regime in which consumers feel they need to take no responsibility for their own financial decisions and consider borrowing to be risk free. The Government should re-examine the MMR proposals which concentrate on the 5% of the market who exhibit less favourable characteristics."