Emad Aladhal, the director of retail banking at the Financial Conduct Authority (FCA), has said financial market safety may have come at the expense of creditworthy borrowers, and a balance is required to open up access to mortgages.
In an address to key stakeholders from the lending community, Aladhal said the mortgage market had become more resilient thanks to responsible lending, but that it had also led to it becoming in accessible to many.
To create a fair balance, Aladhal suggested, regulation should be reframed to identify what should be allowed in the current environment by ‘learning from the past, but not being hostage to it’.
He added:
“Has safety come at the expense of access to creditworthy borrowers? Has the right balance been struck? Could we do more to unlock investment and growth – and in doing so, encourage a more dynamic market, with a wider range of products that meet consumers’ needs?”
Earlier this month, Aladhal explained how the FCA’s five-year strategy is aimed at ‘deepening trust and rebalancing risk to support growth and improve lives’. Speaking at the Building Societies Association Annual Conference, the FCA director acknowledged that successful first-time buyers have higher than average household income and large deposits.
“Our data shows that across the market first-time buyers present no additional risk or underperformance to any other type of borrower. Safety may have come at the expense of accessibility – and in doing so, what other risks are we potentially creating for the future?”
Referring to the strategy, Aladhal added:
“We set out our objectives to support growth and help consumers navigate their financial lives.We have shown that, by rebalancing risks, we can lead efforts to unlock investment and growth. We want to enable consumers and firms to take informed risks – and in doing so support a dynamic and competitive market.”
Aladhal said the FCA was ‘ready to support’ the lending market in a collective effort involving regulators, government and developers ‘to tackle the structural challenges facing the UK’s current housing market’.
He continued:
“Reforms to conduct regulation will only ever be one part of the solution to home ownership. More homes so house prices don’t move further out of reach. Improvements to productivity to boost incomes.
“And to make the changes meaningful, we need you – the industry – to take up the gauntlet of innovation, to use the flexibility we aim to create, to make meaningful progress for our communities.
“So I ask you to consider where you can do more today. Where you can innovate, explore new ventures, and review your practices to meet the long-term needs of your customers.”
