New Mortgage Lending Rules by FSA
In 2013 new rules set out by the FSA (Financial Services Authority) will by implemented to stop a resurgence in risky mortgage lending. The revised proposals by the regulator will use a ruling through “common sense” to put a halt on any property buyers borrowing more than they are able to afford. The lenders are being told they must take into the account the affordability of loans better before they are agreed, while flexibility may be issued to existing customers who might have been prevented from re-mortgaging.
The chairman of the FSA (Lord Turner) has been quoted to say, “While the excesses of the pre-crisis period have largely disappeared from the current market, it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.”
The rules that will be implemented are to stop any re-occurrence of lenders handing out mortgages with cursory checks on borrower’s ability to repay, as seen in the early years of this decade. For example the mortgages offered by Nothern Rock entitled “Together mortgages,” which granted loans worth 125% of the property value.
In the worst cases, mortgages were given by the lenders which were seven times the worth of a borrower’s income, or allowed them to value their real income much higher than it really was, this was the case for many of the “self-certified” mortgages offered.