The UK Mortgage Industry Unites to Halt Damaging, Unwanted and Uneeded EU Regulation

Mortgage Industry chiefs have banded together with the FSA to oppose strict European regulations on the commercial mortgage market. The rules, if introduced, may stifle the market just as it starts to make a recovery.

In a remarkable change in its fortunes, the Financial Services Authority, recently threatened with abolition, has now backed the Prime Minister's anti red tape crusade and has attacked new EU plans, aimed at changing the UK property market.

The EU is planning to begin the harmonisation of mortgage lending. Critics (aka all sane people and experts in the field) point out that it could be potentially harmful to not just the fragile UK housing market, but every sovereign country's domestic property market. What is best for a majority of countries does not mean it will be good for the minority; housing markets are completely different from country to country.

With commercial property currently struggling - you only have to look at the empty retail units on your local High Street to see the extent of the problem - the CML has taken sides with the FSA to oppose the EU rules. Commercial mortgage approvals remain at a low rate and the property market has yet to start a full recovery from recession.

Given this poor economic climate and the difficulties that the sector is facing, adding new regulations to lenders, prohibiting them from flexibility in authorising lending is only going to add even greater burdens to the market that is ill equipped to bear them.

But in spite of the news that the FSA are not backing EU wide regulation, this does not mean that commercial property market will be unregulated. They have spoken out to say that it remains an important factor to ensure that consumers, commercial landlords and everybody involved in the sector has rights.

The FSA is actually in the middle of a consultation and review process regarding tweaking the property market's regulation. After the large boom and bust we've seen in the last decade, more regulation from the FSA or its successor agency was always going to be a given.

Two areas that are already likely to be more closely regulated are short term loans based on commercial property value and bridging loans. Following talks with lenders, short term finance may end up being closely regulated as it can lead to extreme uncertainty and volatility in the market.

The FSA's quiet and measured approach has actually won over many fans in the industry, not least because they are open to ideas and listening to those in the industry about what needs tinkering with. You won't find many sectors where those in the industry are happy and optimistic about the regulators reviews and actions, it seems the 'attract more bees with honey' tactic is working a treat.

In a market that has had more than its fair share of bad news in the last two years, the approach of the FSA is certainly welcome, in part because it is adamant in its opposition to the imposition of European-wide regulations. These new laws threaten to apply rigidly, regardless of circumstances, in every member state. However, it is even more important that the FSA is planning to regulate against dubious lending practices in the Britain but is willing to be reasonable in its attitude towards the industry and listen to the concerns of UK lenders.


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Timothy Frodsham writes for Just Commercial Mortgages the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.