Cost of Mortgages Might Increase Soon – BSA

Mr. Graham Beale, chief executive of the Building Society Association (BSA), in his speech at the annual meeting of the BSA, expressed his concern with the possible rise in the cost of mortgages for UK borrowers, which might well be caused by intentions of the FSA to tighten regulation of the British mortgage market as well as by increased competition among lenders.
According to Mr. Beale, the large amount of capital that building societies will have to provide against lending will negatively influence lenders as well as borrowers. Moreover, the fight between building societies and state-owned banks for savings deposits is also very likely to have negative consequences.
While taxpayer-owned banks such as Northern Rock and other financial organisations such as National Savings & Investments, HM Treasury-backed savings provider, are able to offer UK savers high savings rates of as much as 3.95%, Mr. Beale is determined that the rates have been artificially pushed up by high savers’ demand. He predicts that in the short-term perspective savings rates will either fall back to “economic levels”, or, most likely, will cause a rise in the cost of mortgages.
In the opinion of the BSA’s chief executive, further increases in the cost of mortgages will arrive as a result of new regulations of the British banking sector, proposed by the Financial Services Authority. Let us remind that the FSA wants to make all UK lenders carry out affordability tests in order to determine whether potential borrowers have enough funds to support their loan.
In addition to this, the FSA wants banks and building societies to increase the amount of money that they put aside against the mortgage loan.
Mr. Beale urged the Financial Services Authority to make sure that the proposed regulations do not put UK building societies, which, in Mr. Beale’s opinion, unlike banks, are of ultimate importance to local communities, in a disadvantaged position.