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Mortgage market has become ‘too conservative’

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The mortgage market is struggling to meet consumer needs and has been described as ‘too conservative’ by an industry trade body.

The Intermediary Mortgage Lenders Association (IMLA) said almost two-thirds (65%) of lenders and nearly three-quarters of mortgage brokers (74%) believed the market had shifted too far because of increased regulation.

Both self-employed borrowers and those seeking a mortgage term which goes into retirement have been hit hardest, the trade body claimed.

The Mortgage Market Review rules, which came into force in April 2014, have also affected consumers with lower incomes, with greater limitations on the amount of finance they can access.

However, 39% of mortgage advisers surveyed said they had seen an increase in product availability since the new regulations arrived, compared to 18% who feel there are fewer products on offer.

Peter Williams, executive director of IMLA, said many in the market now feel borrowers have been overly restricted.

“Regulation is vital to ensure that mortgage lending is safe and in proportion to consumer needs and the wider economy,” he said.

“But when families with dependents are among those who find themselves at a disadvantage, there are legitimate concerns that the pendulum has swung too far as a result of successive, incremental measures.”

With further regulation from Europe on the horizon, Williams said the government must asses the impacts of each wave of regulation.

“What’s clear is that each new layer of control squeezes more people out at the margins. As the boundaries grow tighter, we must work to avoid unintended social engineering as a result.

“Current trends suggest that owner-occupation may fall below 62% by the end of the next parliament, and there is a real need for government, regulators and industry to pause and assess the lie of the land. Efforts must focus on striking the right balance between innovation and protection to avoid frustrating people’s legitimate ambitions to own their own homes.”

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