Today’s consultation paper forms the first follow up to the Mortgage Market Review discussion paper published in October 2009. Consultation on these proposals will close in November 2010.
Reflecting the FSA’s enhanced consumer protection strategy and intensive day-to-day supervision, the proposed changes aim to ensure all lenders get back to the basics of responsible lending and that problems are prevented before they can develop or get out of control, according to the FSA..
Some of the key proposals include:
- Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay;
- Requiring verification of borrowers’ income in every case to prevent over inflation of income and to prevent mortgage fraud;
- Extra protection for vulnerable customers with a credit-impaired history.
The tough new proposals, published in the consultation paper, form part of a major review by the FSA into the UK mortgage market and are based on detailed analysis of past lending decisions, looking at the causes of arrears and repossessions since 2005.
- The FSA found that:
46% of households either had no money left, or had a shortfall after mortgage payments and living costs were deducted from their income;