The Financial Services Authority (FSA) has warned the mortgage industry that there’s a ‘very real prospect’ that credit conditions will worsen further into 2008.

Speaking at the Council of Mortgage Lenders’ (CML) seventh annual conference, Clive Briault, FSA’s retail managing director, pointed out that it is essential for lenders to have in place the management expertise to be able to deal with adverse conditions. Briault said that following a long period of benign conditions in the mortgage market, the senior management of many firms have no direct experience of more difficult conditions and therefore may not necessarily be best placed to deal effectively with a much more difficult and challenging environment.

The FSA also begun a new thematic review last month, focused on lenders, to assess responsible lending. Briault said it intends to report the results in March next year. Briault congratulated the 31 lenders who have alerted the FSA to more than two hundred cases of suspected or proven fraud.

Briault said it is considering finding a way to share the names of suspect brokers and said that it ‘would add enormously to the impact of our joint efforts, and I very much hope that a way can be found to realise the potential of such an arrangement’.