The UK mortgage market has worked well for the vast majority of consumers. But in the run-up to the financial crisis there was a tail of poor lending to borrowers who could not afford to repay out of income, with both lenders and borrowers assuming that house price rises would make repayment or refinance possible. As a result, while arrears in this recession have been significantly below the early 1990s, there have been major problems in specific consumer segments and regions, with many customers facing the distress of arrears and repossessions. The scale of payment problems would have been significantly greater if interest rates had not fallen to exceptionally low levels. The reforms to mortgage market regulation which the FSA is now proposing for consultation, aim to ensure the continued provision of mortgage credit for the great majority of borrowers who can afford it, while preventing the re-emergence of the tail of poor lending practice which led to customer detriment. At the core of our proposals are three principles of good mortgage underwriting. Mortgages and loans should only be advanced where there is a reasonable expectation that the customer can repay without relying on uncertain future house price rises. Lenders should assess affordability. This affordability assessment should allow for the possibility that interest rates might rise in future: borrowers should not enter contracts which are only affordable on the assumption that low initial interest rates will last forever.  Interest-only mortgages should be assessed on a repayment basis unless there is a believable strategy for repaying out of capital resources that do not rely on the assumption that house prices will rise. We believe that these are common sense principles of good underwriting which serve the interests of both lenders and borrowers. We also believe that almost all lenders are currently applying these principles; the excesses of the pre-crisis period have largely disappeared from the current market. But it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.