Housing minister aims to head off introduction of strict new rules

Housing minister Grant Shapps is to meet with the chief executive of the Financial Services Authority in order to head off plans by the body to tighten up massively the criteria under which banks can lend mortgages.

Shapps is to meet with Hector Sants to discuss the proposals, which are seen by housebuilders as potentially hugely damaging to the market.

The FSA has tabled proposals which mortgage lenders say will choke off up to 50% of current supply of mortgage lending – which is already at historically low levels.

Shapps has told the Financial Times that he did not want a return to irresponsible lending, but he also did not want the regulator to “shut the stable door” after the housing market correction had already taken place.

Net mortgage lending is already predicted to fall to just £6bn in 2011, the lowest level since 1980. The FSA have tabled a series of measures, including more rigorous checks on potential home buyers, which will further limit mortgage loans.

Housebuilders say the moves, if implemented, could lead to major house price falls.

Shapps has also repeated a call in the last few days to create a more stable housing market, without the huge price rises that have characterised the last 30 years.