One has to wonder how much thought the Bank of England Governor Mark Carney has given to the Mortgage Market Review.
It is not his remit you say – it sits with the Financial Conduct Authority and is all about making sure people can afford to repay the money they borrow for a mortgage. In the past of course, many people have proved unable to repay. But this what regulators call a conduct issue, not a monetary policy one or even a prudential one i.e. making sure banks, building societies and insurers have enough capital to afford to do what they do.
That is all true of course, but the MMR as the acronym goes, is also the first significant intervention into the mortgage and housing market since the financial crisis began. It is also an excellent example of a counter-cyclical measure much discussed by regulators though mostly referring to the amount of capital banks and insurers have to hold in an upturn as they take more risks.
However could this measure have a similar effect? It may be at a different end of the financial supply chain but surely it is a restriction none-the-less. It should make it more difficult to get a mortgage by adding several hoops to jump through. This could to all intents and purposes reduce the availability of mortgages or at least the ability for some people to get a mortgage.
Therefore it should have some calming effect on the mortgage market. But it leaves a host of other questions unanswered.
First how will the interaction between Help to Buy and the Mortgage Market Review play out. The former should make it more likely that the requirements of the MMR are met for individual borrowers. But it will be interesting to see how turns out in practice.
Second, this will do nothing whatsoever to calm the mostly cash purchase based central London property market. But it will surely impact other regions.
It is already causing a judder or two and could reduce the number of mortgages completed UK wide. Indeed one surveyor e.survsays that the number of mortgages on offer is already falling as lenders adjust their systems.
Ipswich Building Society is also warning that the self employed and those earning below £25,000 may not be accepted for mortgages by the giant lenders’ automated systems.
This is obviously a plug for Ipswich’s more detailed underwriting but may be significant none the less.
And any concern that only the better off will be able to get a mortgage could start to ring alarm bells in Westminster.
But will the impact remain a judder, will it cut mortgage purchases a little or could it begin to hold back house prices at least outside the soar away capital and its inner suburbs?
That is arguably the really big question and it is one that no doubt Mr Carney is paying very close attention to. It is the only lever that regulators have dared pull so far, but it might calm the housing the market a little, and that has implications for just about everybody. It will be potential borrowers who may find themselves grilled in a three hour meeting before they get a mortgage who will feel the impact first.
Read more: Jill Insley considers the new rules and what they mean for borrowers.