New rules to prevent risky mortgage lending are to be imposed by the Financial Services Authority (FSA). This will require lenders to undertake much more scrutiny of a borrower’s finances seeking evidence.
The revised proposals are a continuance of the trend in “common sense” standards that will force lenders to assess the affordability of loans more accurately to prevent home buyers borrowing more than they can afford to repay.
These changes are being brought in to prevent a recurrence of the situation we had last decade where some lenders granted mortgages only having undertaken cursory checks on affordability of borrowers to repay. Staggering examples of this were where loans had been granted worth 125% of the value of homes or up to seven times a borrower’s income. There were also loopholes in the systems that allowed borrowers to exaggerate their real income, predominantly in self-certified mortgage applications. People looking to buy Greater Manchester Houses will be affected by these eventual changes.
There is however an element of proposed flexibility for existing customers to avoid barriers to remortgaging.