The FSA has outlined a less than positive picture for today’s housing and mortgage markets at the Mortgage Business Expo in Manchester.

Lynda Blackwell, Conduct Policy at the FSA, outlined figures which revealed a depressed marketplace, one which had fallen heavily from the days pre-credit crunch.

She outlined the huge amount of lender capacity that has been lost since 2007 and the “huge impact this has had on brokers”. She said the marketplace needed “to learn lessons from this”.

On a more positive note she said the regulator was extremely pleased with the level of dialogue and communication it had had from all mortgage stakeholders regarding the MMR and was keen to stress that “the fat lady has not sung yet” in relation to the final rules.

She also said the FSA did not believe “that the MMR is causing lenders to curb their lending”. She said:

“It is too easy to hide behind the MMR; it actually makes commercial sense to fly to quality.”

On the issue of responsible lending she acknowledged there was concern about how the FSA/FCA were planning to apply the rules in practice. It was very conscious of AMI’s fear on how the responsible lending rules would be interpreted and whether it would make firms far more risk-averse. “We want to make sure that doesn’t happen,” she said.

On the issue of the European Mortgage Directive, Blackwell said: “Firms want regulatory certainty. Our view is that it [the EMD] shouldn’t be delaying the impact of MMR. We will certainly align the impact [of MMR] with the EMD to reduce the burden on regulatory firms.”

Finally, Blackwell said the most contentious part of the MMR proposals with lenders had been the removal of the non-advised sales process. She said: “The MMR proposals will mean the majority of sales are advised. This will represent a significant change for lenders and will accelerate the trend towards adviser sales for lenders.”