New FSA Proposals Could Help Mortgage Customers

Written by Administrator on Thursday 15 July 2010

New FSA proposals for mortgage borrowers

The Financial Services Authority (FSA) has outlined new suggestions for mortgage borrowers to ensure that they can afford monthly mortgage payments.

The FSA wants to ensure that mortgage customers are protected and that lenders only lend to those who can afford mortgage payments.

Key proposals:

  • Introducing affordability tests
  • Verification of borrowers’ income
  • Extra protection for susceptible customers

The proposals are a direct result of a review undertaken by the FSA, which looked into causes of mortgages in arrears and repossessions since 2005.

Conclusions from the review:

  • Nearly half of all households either had no money left or had a shortfall, after mortgage payments and living costs were deducted from their income
  • Almost 50% of new mortgage customers were not asked to verify their income between 2007 and 2010
  • Interest-only mortgages have been increasing, at the topmost, 30% of all mortgages were interest-only
  • Many borrowers depend on future house price rises and unsure life events to repay their mortgage
  • Customers with credit-impaired history are the most vulnerable

The FSA director responsible for the mortgage market, Lesley Titcomb, said:

There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back.

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