The Financial Services Authority (FSA) have published new proposals today. They have carried out a two year review and are aiming to introduce much stricter checks to avoid a repeat of the credit crisis, making sure that borrowers can afford to pay back the loans.
The review is open for comment until March 2012 and would come into effect in 2013. The FSA estimate that the new ruling would affect 2.5% of mortgage customers in Britain. The three main points are that lenders need to better assess affordability of mortgages to make sure that customers can repay, that the assessment should allow for the possibility that interest rates might rise, and that interest only mortgages will only be offered if borrowers earn enough to cover repayments as well. Those looking for self-certified mortgages will need to submit fully verified accounts.
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