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Costs of regulation ‘could threaten homeownership’

Ramesh Sharma

June 1, 2004

In a pre-budget submission to the Treasury, the CML has estimated new regulatory initiatives could add a further £500 to £1,000 to the cost of buying a home. The rising costs of regulation are in danger of swamping the government’s plans to expand homeownership, the submission said.

The CML has emphasised to the government that regulation by the FSA is only one of a broad range of regulatory initiatives currently affecting lenders and adding costs for their customers.

It says aside from the FSA regime lenders have to respond to a complex range of new regulatory initiatives, citing the most significant as the new Basel II capital requirements and the proposal to introduce home information packs (HIPs) in 2007.

The CML’s pre-budget submission details a much broader range of additional initiatives affecting mortgage and housing markets, and emerging from different government departments as well as devolved administrations and Europe.

Peter Williams, CML deputy director-general, said: “The FSA’s mortgage rulebook is simply one strand in the mesh of regulation affecting the lending industry. The breadth and complexity of the government’s measures is surprising given that mortgage markets are generally competitive and efficient. The scale of intervention is at odds with the government’s commitment to de-regulation or even better regulation.”

“ We applaud the government’s achievements in securing low, stable interest rates and a strong labour market but the issue of regulatory costs needs to be addressed urgently before it completely undermines the drive to expand homeownership,” he added.

Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, said: “As the industry begins to prepare for Basel II and the introduction of HIPs in just over a year or so, commentators are agreeing it would be sensible for the government to consider the likely costs and implications of future regulations especially as it wants to further expand homeownership.”


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