Mortgage crackdown on the way

Posted in 'Mortgages' by Barry Stamp

19 December 2011

The Financial Services Authority (FSA) has just published its latest report on the mortgage market, which follows a long series of consultations. The FSA is calling for stricter underwriting of mortgages, in particular seeking that income is always verified by lenders, which means the end of ‘self-certification’ or ‘fast track’ mortgages.

In addition, and amongst other things, the FSA is looking to lenders to take extra care when lending to older borrowers to make sure that repayments can be afforded, adding ‘stress tests’ and introducing new lending policy guidelines on remortgages and debt consolidation loans.

The FSA estimates that the tightening up of lending will result in an additional 2.5% of borrowers being declined, or being offered much smaller mortgages.

Even more consultation is now being sought and any changes will not come into play until 2013.

To many mortgage professionals, these are sensible suggestions which are already being practiced by the majority of mortgage lenders. This is one of the reasons why current levels of mortgage lending are as flat as a pancake.

Some lenders may argue against any outright prohibition of self certification mortgages, as contrary to expectation, there are certain types of self-certified mortgages that actually perform better than income-verified mortgages – a great deal depends on the loan-to-value ratio.

Whatever the outcome, there can be no doubt that getting a mortgage will be a little bit harder. To make sure that your mortgage application doesn’t fall at the first hurdle because of something or someone unexpected on your credit report, you might consider subscribing to our Multi Agency Credit Report .

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