Blog

‘Tougher mortgage rules to be introduced’

November 20, 2009 at 4:31 pm

The FSA (Financial Services Authority) has introduced tough new proposals regarding mortgage lending which aim to stop mortgages being handed out to those most at risk of failing to make repayments.

Once the proposals have been passed, self-certification loans will be banned so borrowers will have to prove their income. In the past these have allowed about a million people to get mortgages without proving their incomes, and have made it easier for people who cannot afford them to get a mortgage anyway.

It will also introduce ‘affordability tests’, which are designed to look into the spending habits of borrowers to see if they can afford the mortgage repayments. These will look into their bills and debts as well as such factors as alcohol spending and how many holidays they take, in order to work out their disposable income.

The FSA wants lenders to stop handing out loans to high risk customers, such as people with poor credit records. It also wants to see a move away from the concept of renting being bad and a waste of money.

Borrowers failing to pay back their mortgages has been one of the main problems of the recent recession, so this should be welcome news. The FSA has said that in 2007 about half of all new mortgages were provided without income checks, and it now wants to put the responsibility on the lenders to stop handing out risky loans.

The managing director of supervision at the FSA, Jon Pain, said that “we need to act now to address the issues we have identified”.

Posted in Uncategorized |

Leave a Reply