FSA to impose new mortgage-selling rules by 2013
Revised regulations are likely to be enforced by the Financial Services Authority (FSA) within the next two years to prevent mortgage mis-selling, BBC News reports.
The new rules, which should be in place by 2013, will state that lenders must more carefully consider the affordability of loans in order to stop home buyers from borrowing more than they can afford.
A mortgage market review by the financial regulator said that low interest rates have disguised repayment options that may emerge when the rates rise. The FSA hopes the stricter guidelines will encourage lenders to carry out more thorough checks before authorising a mortgage, a lack of which was experienced at the beginning of the decade.
One bank was offering loans of 125 per cent of the house value, while others have allowed borrowers to “exaggerate their real income”.
As a result, the new rules will mean the end of self-certification mortgages, where income verification is not always necessary, Channel 4 News explained.
Commenting on the announcement, Lord Turner, the FSA’s chairman, said: “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.”