FSA sets out mortgage plans

19/10/2009

The mortgage market will face radical future changes if Financial Services Authority (FSA) proposals are adopted in future.

According to the City watchdog, regulation of the sector will become more "intrusive and interventionist", in order to avoid the glut of cheap lending that helped to bring about the house price bubble and the financial crisis.

Under the plans, self-certification mortgages are to be banned and lenders will be obliged to conduct affordability tests on borrowers in order to make sure they are able to repay their loans.

Mortgage advisers could also become personally accountable to the FSA.

Meanwhile, people who are struggling to repay their loans are to be given added protection through the banning of certain arrears charges.

Jon Pain, FSA managing director of supervision, said: "We recognise that we need to bring about a step change in regulation and we need to act now to address the issues we have identified."

EuroDebt director Kevin Still commented: "We are concerned that people who are self-employed may really struggle to obtain a re-mortgage coming out of the recession. There need to be reasonable processes in place for the self-employed to be able to present their accounts and obtain re-mortgages, though this may be hard if there is limited trading history."

He added: EuroDebt often find that where a business is in difficulty there is a blurring of personal and business debt, often with personal credit card debts that are associated with running the business, for example, a taxi driver putting the diesel for the cab on their personal card. EuroDebt works with business recovery specialists to separate personal and business debt, to find the best debt solutions for both problems."

The financial crisis has contributed to an increase in the number of people defaulting on their mortgages and losing their homes.

Repossession numbers in the UK are projected to rise from 40,000 in 2008 to 65,000 in 2009.

Tags; Debt Management and Banking, Young Family Finances,

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