moneysupermarket.com comments on Turner report

Commenting on today's news that the FSA is considering whether to regulate mortgage products and will publish a paper in September, Louise Cuming, head of mortgages at moneysupermarket.com, said: "Over the past few months consumers have seen a number of high street providers of mortgages, savings and other products either disappear, be taken over, or be nationalised. Consumers who might have qualified for a mortgage a few months ago now find that they don't. At the same time many are frightened for their savings.

"The 126 pages of Lord Turner's report will do little to reassure the average saver or mortgage borrower in the UK that the financial institutions in which they place their trust will be secure in the future.

"At a time when the mortgage market needs stability and lenders need to start lending again the FSA is launching yet another review, this time into mortgage product design. This is the last thing consumers need. The mortgage market has ground to a halt due to the collapse in the securitised funding market, mainly due to the structure of the market, not the underlying mortgage assets.

"The record of Government and regulators in designing products for the mortgage market is not a good one, as anyone who remembers CAT standard mortgages will testify.

"Lenders long ago moved away from the blunt instrument of income multiples to a more sophisticated view of affordability. There would be absolutely no point in applying a cap on LTV across the board, as the very principle of affordability means that borrowers are judged on their individual circumstances, rather then being shoe-horned into a category.

"We have grave concerns over any rigidity surrounding LTV - 40 per cent of homeowners looking for a new deal have an LTV of 90 per cent or more, yet only 5.6 per cent of the total mortgage market is available to them. We would urge the FSA to consider ways of helping these people who are trapped with their current lender until either house prices rise or they can pay off a chunk of their mortgage debt.

"Having said all this, the FSA has a bigger problem on its hands, in the shape of the sub-prime market. The bigger question surely has to be whether there should even be a sub-prime sector in the future, given the disappearance of wholesale lenders who were fuelling this part of the market. Similarly, we would also implore the FSA to turn its attentions to the buy-to-let and self-cert market which carry their own dangers. Applying a one size fits all solution is not the answer to reforming the market."