Lenders urged not to pass on rising costs to consumers

The Association of Mortgage Intermediaries (AMI) has responded to comments made by the chief executive of the Financial Services Authority (FSA), Hector Sants, on the current state of the mortgage market.

Richard Farr, Director of the AMI, said: "We fully recognise the need for the FSA to assess the state of the mortgage market on a regular basis. The market is currently going through a period of turbulence, as all markets will do. However, we expect the market to rebalance during the course of the year.

"Recent results in the banking sector demonstrate the relative strength of the UK mortgage market in comparison to the US. Lenders and brokers in the UK have been much more responsible in their dealings with consumers and the underlying credit quality of the assets remains positive.

"There may be a reduction in the size of the wholesale lending market, which risks leading to an upward trend in the cost of borrowing. But this should not be passed on in full to the consumer. The banking profits show the resilience of the market and banks should seek to absorb a share of these extra costs and ensure they are treating customers fairly. The extra costs, and the withdrawal of certain mortgage products requiring lower deposits, will make it extremely difficult for first time buyers in particular.

"We also need to seek out alternative sources of funding for the UK mortgage market. That is why we have been in discussion with the Treasury, the Bank of England, the main political parties and the industry to help bring new lenders into the market from outside the UK."