The Association of Mortgage Intermediaries (AMI) has warned against product regulation and called for average household disposable income to be the main gauge of mortgage affordability.

AMI’s latest report compares the UK mortgage market against European and US markets. It questions whether regulatory actions or inactions have had the required effect in the UK over the last five years.

The paper is intended to inform the Financial Services Authority (FSA) consultation on mortgage market regulation starting in the third quarter of this year. Dr Oonagh McDonald, former MP, Treasury spokesperson and FSA director, drafted the report, which argues that the sources of problems in the US market were not replicated in the UK and that lax lending does not cause house price bubbles.

The AMI report also said that by limiting the supply of funds or the price of those funds, the regulator would only deflate prices temporarily, creating the next bubble when the supply of funds improves. It also argued against limitations to loan-to-value (LTV) and loan-to-income ratios.
AMI director Robert Sinclair said there is clear evidence that UK mortgage lending criteria is not to blame for the economic crisis. US non-prime lending peaked at about 32% of their market, while in the UK it did not get above 12% of overall mortgage lending.