And then the stable door was locked. Pity the poor horse when it turned round to come back home. It couldn’t get past the door; it was, after all, locked.

Back during the boom, mortgage lending was mad. This is not being wise in hindsight, this column said so often enough at the time. Now, as chastened banks overreact and do the precise opposite of what they were doing, the FSA has joined the party.

Have you ever found yourself in the midst of a traffic jam doing about 0.1 miles per hour, only to see signs warning of traffic ahead and to reduce speed: ‘NOW’? Galling, isn’t it.

Well, that’s what the FSA is like. Its incompetence during the boom beggared belief, and now it wants to impose limits on mortgage lending. It wants to see an end to self-certified mortgages, and wants to ensure lenders don’t just take into account whether customers can simply afford the interest on their mortgages, but that they can repay the capital too.

There is a snag. Self-certified mortgages are aimed at people who are self employed.

The FSA, in its exuberance to lock the door long after the housing horse has bolted, may end up making matters worse.

By the way, a similar argument can be made about subprime. Subprime mortgages are a good idea, and should provide an invaluable service to certain people who perhaps have been unlucky in the past. Subprime mortgages never were the problem, rather it was the way they were sold, or mis-sold. Now, thanks to overreaction, subprime mortgages have gone the way of the dodo.

It is called the recency bias, when we are unduly influenced by recent events. So lottery ticket sales rise in a store that had recently sold a winning ticket. Or, after 9/11, travellers drive more and fly less, and as a result there are more fatal car crashes. (This change in mode of travel was responsible for more deaths in the US than occurred as a direct result of the terrorist attacks.)

We are not arguing that reforms to mortgage lending are not required. But can we really trust an organisation whose judgement was so woeful during the boom, not to make matters worse, again?

Return to House prices: the bears are back