FSA proposes new mortgage affordability rules

The Financial Services Authority (FSA) has proposed a number of measures in a move to reduce excessive mortgage lending levels however, in The Telegraph yesterday mortgage advisors warned these proposals could mean some borrowers will struggle to find a competitive mortgage deal.

Those expected to be worst affected are the self-employed as the proposals include banning ‘self cert’ mortgages altogether. Self cert mortgages meant that borrowers did not have to prove their income. Originally designed to help those self employed with fluctuating incomes or who did not have three years’ of accounts, many used them during the housing boom to falsely inflate their income – even though this has meant many over stretched themselves.
Interest only mortgages will also feel the pinch as borrowers may struggle to get these without proving an obvious method to repay the outstanding capital.

The FSA’s proposals have been created to make sure that mortgage lenders only lend in a responsible manner, checking all details are correct and that the borrower can afford the repayments. Although this is difficult to argue with, many already believe the lenders make these checks, especially as lending criteria has tightened so much since the credit crisis.
The FSA however says these checks may not be sufficient as around half of all households have no extra cash or even a shortfall after all their living costs and mortgage has been paid every month.

Many fear that making these checks more manual will mean borrowers have to wait longer to get an approval and the cost of manual checks will result in higher mortgage fees.

Those undergoing mortgage advisor training to become a mortgage advisor will learn about the role of the FSA and the impact of such increases on their CeMAP courses.



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