ROOF Blog

Fitch, one of the world’s most influential ratings agencies, said that the reforms proposed by the Financial Services Authority (FSA) could result in higher costs and greater inefficiencies in the mortgage market.

The rating agency said the FSA’s Mortgage Market Review ‘could have negative financial implications for mortgage customers instead of the intended benefits’.

Fitch said its concerns were specifically around the proposals for arrears management, which it said were too prescriptive and would take away ‘flexibility’.

Robbie Sargent, director in Fitch’s European structured finance operational risk group, said:

‘The assessment of borrowing capacity, and disposable income, along with the verification of income for all applications, will require a detailed methodology, and in all likelihood, the provision of some form of manual underwriting for all loan applications.

‘This will almost inevitably lengthen the mortgage application process and push up costs for the lender, which may in turn be passed on to the borrowers in the form of higher interest rates and/or product fees,’ said Sargent.