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Mortgage lending shake-up
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New rules are set to be introduced to shake up the mortgage market and ensure it works better for consumers
The Financial Services Authority (FSA) has set out proposals for major reforms including banning self-certified mortgages and putting the onus on lenders to check that borrowers can afford their mortgage.
The proposals also include ensuring businesses don’t profit from people in arrears and making all mortgage advisers personally accountable to the FSA. Certain “toxic” deals, such as a very high loan-to-value (LTV) combined with a patchy credit history, will also be banned under the new rules.
cut home costs
The changes are necessary to prevent a return to the reckless mortgage lending seen in the final years of the property boom. When house prices were rising, lenders were falling over themselves to offer big loans, often to people who couldn’t afford them. However, when the credit crunch hit some people struggled to repay their mortgages – and others found stricter lending criteria prevented them from remortgaging or moving house.
“The mortgage market has seen extraordinary upheaval over the last 18 months and while it has worked well for the vast majority of borrowers, some have suffered great financial distress,” said Jon Pain, FSA managing director of supervision. “We recognise that we need to bring about a step change in regulation and we need to act now to address the issues we have identified.”
by Emma Lunn, 19 October 2009
