Redrow's mortgage famine can't be turned into a feast

Steve Morgan at Redrow, the housebuilder, is hopping mad. A mortgage "famine" is depriving a generation of the right to buy their first homes with a 95% mortgage, as their parents and grandparents did. That pesky Financial Services Authority is to blame, he thinks. So does the Council of Mortgage Lenders, which launched its own tirade against the regulator's "flawed and impractical" review of the mortgage market. The duo should calm down. It is true, of course, that tighter lending standards, as encouraged by the FSA, make it significantly harder for many twenty-somethings to get a mortgage. But Morgan and the CML have chosen an odd moment to make the argument that the regulator has gone too far in its drive to promote responsible lending. House prices are falling again and nobody can say with certainty that interest rates won't be significantly higher in 12 or 24 months' time. Even at current prices, houses look about 20% overvalued against long-term measures of affordability, such as price to average earnings. That is a dangerous climate – for lender and borrower – in which to distribute 95% mortgages. In the circumstances, it is reasonable to ask lenders to take a strict(ish) interpretation of the FSA's guidance on interest-only mortgages – that the borrower should be able to afford a repayment mortgage. To use the FSA's phrase in its slapdown to the CML, it's common sense. True, the FSA's stance won't encourage the building of houses. But there's a trade-off here: greater financial stability comes at the expense of less easy access to credit for those without savings. There will come a time when it is appropriate to relax lending standards – but it's not now.