New Mortgage Market Rules Set Out By The FSA
Fri, 23 Dec 2011
The Financial Services Authority (FSA) has unveiled a drastic shake-up of the UK mortgage market, aimed at preventing the return of risky and irresponsible mortgage lending .

In its Mortgage Market Review, the UK’s financial services regulator said loans should only be advanced where there is a reasonable expectation the customer can repay the loan without relying on "uncertain" future hikes in house prices .

Income will have to be verified in every application and lenders should also place greater emphasis on other regular outgoings.

Interest-only mortgages should be considered as a "niche" product and only offered where there is a credible plan to repay the capital, the report said, adding: "We would expect most mainstream lending to take place on a capital and interest basis with interest-only being considered in limited circumstances."

Explaining the reasons for the changes, the FSA said: "While risky, lower-quality lending may currently be restricted, there is a real danger that, as funding comes back into the market and lending starts to pick up again, there will be increasing pressure on firms to consider higher-risk lending and focus more on market share than maintaining lending standards."

The new rules mean the end of self-certification mortgages, often used by the self-employed, and also "fast-tracked" mortgages, an accelerated approval process under which verification of income may not be required by the lender.
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