FSA boss admits mortgage market failures

18/11/2009

The mortgage market "failed" for some customers, the Financial Services Authority (FSA) said.

Jon Pain, managing director of supervision at the regulator, said that future reforms of the sector should make the market more "flexible" and "sustainable".

The comments follow recent FSA proposals for reforming mortgages, including restrictions on arrears charges for customers who are already in debt.

Self-certification mortgages, which do not require the borrower to provide verification of their incomes, are also to be outlawed under the proposals.

These "liar loans" have already been withdrawn by UK lenders.

Mr Pain added: "Just as a house requires solid foundations to be long lasting, mortgages need to be based on a proper assessment of affordability if we are to have a sustainable market.

"Everyone who takes out a mortgage should be able to repay it - they should have some evidence that they can repay it and lenders should take note of that evidence."

Kevin Still, EuroDebt director, commented: "It is interesting that Lesley Titcomb at the FSA confirmed that their proposals on self-cert will not block access to the market for the self-employed. There are around 3.5 million self-classified self-employed jobs, many forced to go self-employed or paid through an agency following redundancy. In reality, to qualify for a ‘standard’ mortgage, the self-employed will either have to produce at least two years’ worth of accounts or secure a home loan from the bank where a business current account is held where evidence of income and business expenditure is visible.

"EuroDebt seeks to help people with personal debts that may have arisen from trying to support their business, for example, widespread use of credit cards to pay for business travel and other operating costs. We make frequent referrals to our business recovery specialist whilst looking at dealing with unsecured personal debts as part of our face-to-face financial review.”

Recent research from the Council of Mortgage Lenders suggested that there would be 48,000 home repossessions in the UK during 2009.

Last year, this total reached 40,000.

Tags; Housing Debt and Bills, Young Family Finances,

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