19th March 2009
Plans being considered by the Financial Services Authority (FSA) to place caps on mortgage sizes represent a 'one size fits all' solution that is unlikely to work, it has been claimed.

In the proposals put forward by the watchdog's Turner Report this week, borrowers would be restricted to mortgages equivalent to no more than three times their annual wage, while strict caps would also be placed on loan-to-value levels.

However, while some observers have argued that such a move is necessary to eliminate the recent culture of irresponsible lending, others have argued that these changes could do as much harm as they do good.

One such critic, Catherine Hearnden, director at MyMortgageDirect, said: "It just doesn't work; affordability works.

"If they want to say: 'You have to be very strict on affordability', then that's absolutely fine. That is a positive move and it is sensible, but a one size fits all for everybody doesn't work; everybody's different."

Meanwhile, the Council of Mortgage Lenders has revealed that the number of home-purchase loans issued to first-time buyers has dropped by 28 per cent over the past 12 months.



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