Q&A: Will you be hit by mortgage lending crackdown?

By Daily Mail Reporter

Last updated at 9:20 AM on 19th December 2011

The Financial Services Authority has unveiled its wide-ranging shake-up of the mortgage market, calling for tougher restrictions on how home loans are approved to prevent a return to irresponsible lending.

We take a look at the financial watchdog's tough new proposals and explain how they can affect you.

Why are watchdogs reviewing lending?  

In 2009, the Financial Services Authority announced that it would undertake a review of  the mortgage market in the wake of the global financial crisis. The watchdog  was concerned about a culture of irresponsible mortgage lending at the height of the housing boom which saw people being granted mortgages up to seven times  their income.   

Tough rules: The FSA proposals mean that anyone seeking a mortgage will be required to provide much fuller evidence of basic household spending

Tough rules: The FSA proposals mean that anyone seeking a mortgage will be required to provide much fuller evidence of basic household spending

What does this mean for first time buyers?  

The new rules mean that all new homeowners will have to meet a stricter set of criteria. This includes proving what they earn, showing they could afford their mortgages if interest rates rose and  proving to the bank that they have enough disposable income after bills to meet the repayments. As many of these criteria have already been adopted, the watchdog insists the impact will be ‘minimal’ on first time buyers.

I’m self employed? How will I get a mortgage?  

With difficulty. Banks have been told to end so-called ‘liar loans’ - the once popular deals handed out to those who ‘self certified’ their income. In future they will have to submit fully verified accounts. 

 

I’m an existing homeowner desperate to move – am I helped?  

Yes and no. Those with good credit histories trapped in a small amount of negative equity who want to move to a home of similar value will be helped. Those who want to trade up, however, will face the same stringent tests as any first time buyer. In particular, they will find trouble accessing good deals if they have previously missed payments.

I’m an elderly mortgage applicant – what’s in it for me?  

Those nearing retirement will find it more difficult to obtain a home loan. The closer the applicant is to retirement age, the harder they will find it to take out a loan.  Banks will be told to ask about the ‘level of income in retirement’.

What does it mean for the economy?  

The watchdog admits that the tougher rules could strip £2.9billion from the UK economy as it will lead to fewer people buying and selling homes.

 

Here's what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.

The comments below have not been moderated.

Shock horror, lenders implement measures to make sure people can actually afford to pay for a property they buy. Stable door and bolted, but good news nonetheless. The problem is not what people are allowed to borrow, the problem is deluded sellers and estate agents still convinced houses are worth the over inflated prices of the last decade. Wakey wakey.

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This is exactly how HSBC have operated for years , they apply stress tests to mortgages to ensure they're affordable if interest rates rise. Older applicants have to evidence their income in retirement. Interest Only Mortgages must meet strict criteria. And there must be a certain level of disposbale income after all commitments have been met. Shame other lenders didn't do similar earlier. We may not be in the mess we're in now

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There is no doubt that it is getting harder and harder for people to get a mortgage To a certain extent one can understand this but the lenders are to blame because they were lending well over the price of the property to people who could not pay Now the decent people are suffering fpr that I am in my 80s and have grandchildren and have told their parents my son and daughter that when anything happens to me to hang on to the house for such of them as want it because if will save a lot of hassle to have a property to own

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You should only be concerned if you are a dodgey estate agent from Ilford who bought at peak price two props in the UK and several more new builds in Spain which have subsequently crashed in value and are now in negative equity funded on IO mortgages which are being phased out, apart from that nothing to worry about then.. Hilarious

Click to rate     Rating   3

Should ensure a rash of remortgaging by 49 year olds.

Click to rate     Rating   6

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