Publication of the Turner report ends speculation over mortgage capping

The Financial Services Authority (FSA) has published the Turner report, in which its chairman, Lord Turner, looked into the events that led to the financial crisis.   Before publication there was widespread speculation over the findings, including a mortgage cap of 3 times the borrowers income and limiting the maximum borrowing well below a property's value.   However, while the report finds some merit in limiting borrowing, it also points to various disadvantages, so the FSA will consult again in September.   The report gave three arguments in favour of limiting borrowing further, which were to protect both the consumer and the lender against the consequences of “imprudent borrowing”, and to regulate excessive property prices. Arguments against included disadvantaging those first time buyers who cannot rely on family to help with a deposit.   The report also raised the question of whether a high loan-to-value mortgage would be better than a combination of a reduced mortgage, and “top up” funding being sought from less favourable sources, such as credit cards or unsecured loans.   Another concern is that the many borrowers who have already borrowed more than 3 times their income, and maintained a good credit rating, could be denied the opportunity to remortgage to find the best deal, or move home. This would leave them no choice but to take a new mortgage with their current lender, regardless of suitability.   Some countries, such as Hong Kong, and the Netherlands already employ restrictions on the size of home loans.

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