In an effort to keep the economy from being rocked in the future from a financial crisis brought on by mortgage lending problems, the Financial Services Authority (FSA) has taken on the task to complete a Mortgage Market Review. Through this review the FSA will set regulations that will keep both the borrower, the lender, and the economy safe. However, there are those economy watchers that warn stricter regulations than what lenders have already self imposed could cripple the fragile housing market and further hinder the economy’s recovery.

Treasury Select Committee (TSC) member George Mudie stated that he is "horrified" by the review. He stated in a committee meeting: "I am horrified by the MMR. I think the FSA has lost its balance, to guard against ’you were weak and are still weak’. They have swung the other way and could damage the building industry and the mortgage industry and young kids getting a new house because of all the regulations."

He asked Graham Beale, chief executive of Nationwide Building Society, whether the FSA was the regulator to determine risk or was that the responsibility of the borrower and lender.

Beale responded to the TSC: "I don’t think the FSA did a full economic assessment in terms of understanding the implications of the MMR and what it would do to the ability of borrowers in the UK to borrow from banks or building societies.

"When it eventually did, it realised there were unintended consequences, which is why it has entered consultation with a view to getting something more pragmatic.

"It will now hopefully achieve some of the safeguards it intended but not undermine the market."

The TSC last week published its final report on financial regulation. It suggested that authorities should be cautious in introducing reforms and they should ensure that rules that are "effective but proportionate".

Michael Coogan, director general of the Council of Mortgage Lenders, stated: "The Treasury Committee has introduced a dose of common sense into the debate.

"It is essential that we take the time to introduce the right reforms, and strike the right balance between protecting consumers and ensuring they have access to mortgages at a reasonable cost."