In a recent speech to the BBA on the creation of the new Financial Conduct Authority (“FCA”), the FSA's CEO, Hector Sants gave an interesting update on the FSA’s plans relating to the MMR. Describing the MMR as one of two key initiatives to deliver structural reform, the other being the Retail Distribution Review, Sants confirmed that the FSA will publish a full impact analysis on the MMR in the summer of 2011. He stated that the FSA has recognised the sensitivity of the interaction between their actions and the public policy agenda. To that end the analysis will be both from the conduct and prudential perspective, with the intention of laying out the proposed framework in the autumn of 2011. No rule changes will occur before 2012. The FSA’s goal will be to “reduce the possibility of consumer detriment in relation to affordability occurring without impacting the ability of the market place to offer affordable mortgages”. Whether the proposed framework can achieve that goal remains to be seen.

The publication of the FSA’s business plan for the coming year has firmed up some of the detail on the MMR proposals, with confirmation that interest-only mortgages will not be prohibited. The plan to use a fixed 25 year term for assessing affordability also looks set to be dropped in favour of a more flexible approach which will look at individual circumstances. A further paper on responsible lending is to be published in the summer, which will be both a policy statement and a consultation paper. The steer is that this will contain “near final” proposals that may not be up for further discussion, as well as other areas being consulted on again.