FSA mortgage plans 'should be tougher'

20/10/2009

Financial Services Authority (FSA) plans to tighten regulations on the mortgage market have met with a mixed response.

Yesterday, the City watchdog unveiled a range of proposals, including an outright ban on self-certification mortgages.

The FSA also plans to introduce affordability tests to be conducted on loan applicants, while rules are to be tightened on arrears charges.

Responding, the British Bankers' Association warned that any "new rules" must not create "unreasonable obstacles" to buyers.

"The issue that faces all of us - lenders, borrowers and regulators - is ensuring the risk of taking out a mortgage can be shared effectively," the organisation added.

Meanwhile, Citizens Advice welcomed plans to increase responsible lending, citing figures that showed that enquiries from members of the public on mortgage and secured loans arrears had risen by 49 per cent in the past year.

"A ban on arrears charges when borrowers are already repaying should ensure enhanced protection for borrowers which is long overdue," Sue Edwards, head of consumer policy at the charity, said.

Meanwhile, Which? chief executive Peter Vicary-Smith said that, although he was "pleased" with the reforms, he wanted to see "tougher measures" taken by the FSA.

Also commenting on the FSA proposals, EuroDebt director Kevin Still said: "There is a delicate balance to be struck between tightening responsible lending requirements and excluding some UK residents from reasonably obtaining a mortgage or re-mortgage, for example the self-employed. Affordability tests and proof of income should be based upon realistic checks that can be introduced into the broker and underwriting processes.

"Many consumers will be hoping to re-mortgage at some point in the next few years to improve the terms of their mortgage and to potentially consolidate unsecured debts accumulated before or during the recession. EuroDebt expects to see a continued rise in Debt Management Plans and IVAs where re-financing is not available or in a client's best interests."

Tags; Housing Debt and Bills, Young Family Finances,

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