Until recently there was no specific financial regulation applying to mortgages. Since taking over regulatory responsibility, the FSA has done what it does best: it has produced reviews running to hundreds of pages; written voluminous rules; and then written further rules providing for exceptions to those rules. A mortgage is a contract between a bank and borrower. Both have an incentive to ensure that the debt is repaid. At times, over-exuberance and bad behaviour may be problems, but they cannot be solved with bureaucratic regulation. Britain’s unregulated mortgage market worked well. Costs were low and defaults – even in the early 1990s – have been limited. Mortgage regulation is likely to lead to more expense and irrelevant paperwork for customers. Ironically customers may end up taking out expensive, unsecured loans instead of mortgages, which would be a disaster.
This article appeared as part of a debate in City AM.