The Financial Services Authority (FSA) has today proposed affordability tests making lenders responsible for a customers means to take out a new mortgage.
These proposals come after the research, published in a consultation paper, of extensive analysis of past lending decisions and looking at causes of arrears and repossessions since 25. It found almost half of new mortgages opened 27-21 were found to be provided without the need to verify a customers income, and 46% of borrowers have no money left after payments. Therefore, verification of borrowers' income and extra protection for vulnerable customers with a credit-impaired history are measures also intended to be considered. "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, said Lesley Titcomb, FSA director responsible for the mortgage market. "While it is clear the mortgage market has worked well for many, we need to build a strong new framework to protect mortgage customers and to ensure that the problems we have seen in the past do not happen again, particularly as the mortgage market recovers." Self-Certified Mortgage Lending Debt charity Consumer Credit Counselling Service (CCCS) supports the self-certified mortgage ban as an essential guard against reckless lending. "Buying a home, particularly for the first time, is a huge step. It is the biggest financial decision that most people will have to make so it is important that they make the right choices, said CCCS chairman Malcolm Hurlston. "Banning self-certified mortgages, and adding increased protection for those with a history of debt problems, will help inform these decisions and prevent people from being sold a home they cannot afford."
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