The Financial Services Authority is cracking down on hard on the policies and practices of corporate banks when it comes to first time buyer mortgages, and has now set out new regulations to reform the inflated UK mortgage market.
Recent observation found that certain lenders offering mortgages that were over five times the income of the borrower, the new rules will help stop business banks from giving out risky credit and causing another repeat of the 2008/2009 mortgage meltdown.
From this point on all those seeking a mortgage will be required to take the “affordability test”, which aims to determine whether borrowers have enough income to support the mortgage loan they are applying for.
Self certified mortgages will be completely banned, along with toxic loans, mortgage lenders will no longer be able to reel in profits via investments from homeowners in arrears when the new regulations come in.
Jon Pain, FSA managing director of supervision, said: “The FSA needs to ensure that firms only lend to people who can afford to pay the money back. The reforms that we have announced … will ensure that the mortgage market works better for consumers and that it is sustainable for firms.”
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