Government Regulation on Mortgages?

Someone recently suggested that the government should consider regulating maximum loan to values and or income multiples on new mortgages. Facts & Figures: independent mortgage advisers say a resounding no to this crass stupidity!

It is absolutely NOT for the government to attempt to regulate property pricing, on three grounds:

1. The vast majority of people in the UK want to own their own home. This strong desire is indelibly inscribed upon the British psyche. In a free society it is the role of government to help people to achieve their aspirations. It is certainly not to tell them what those aspirations should be, nor to regulate their chances of realising those aspirations.
2. It is not the role of government to intervene in a free market - full stop.
3. Any attempts at regulation by the government either in business (Leyland, British Coal, British Steel) or regulation (the FSA, dangerous dogs or our ridiculous health and safety laws) invariably end in failure - either due to the law of unintended consequences or plain government incompetence. Lending stimulates economic activity and it has a multiplier effect on the economy; dampen lending -  there is less money in the economy and everyone suffers.

The traditional argument is that property prices are determined by that most basic law of economics: supply and demand. On our small island there is inadequate supply so prices go up. However the main reason for inadequate supply is our arcane planning law. Relax planning (and no, I am not saying build across green belt - there is plenty of room significant brown field development) increase supply, prices fall and everyone gets want they want. But we now know that the availability of credit also has a profound impact on the market; today the only reason people are not buying property is that they cannot easily get a mortgage. At a time of low prices and low interest rates I would argue diametrically against the proposition:

FORCE the banks to lend against higher income multiples and at higher loan to values and help drive the economy out of recession.

Facts & Figures are independent financial advisers and mortgage advice consultants based in Wye near Ashford and Canterbury in Kent.