FSA announces new 'common sense' rules for mortgage market

By Daniel Culpan

The Financial Services Authority (FSA) has confirmed new rules that are designed to put 'common sense' back at the centre of the mortgage market and stop homeowners ending up with a mortgage they can't afford to repay.

The rules, published as part of the FSA's Mortgage Market Review (MMR), will be brought into effect on 26th April 2014. One of the measures, designed to help borrowers 'trapped' on their current mortgage deal as a result of stricter lending criteria, will be activated immediately.

The raft of measures mean that all future customers will need to prove to lenders that they can afford a mortgage, which includes providing evidence of their income. The majority of mortgage sales will also require expert advice, such as face-to-face or telephone sales. Also, interest-only mortgages will only be approved if the borrower can show they have a realistic repayment plan.

Martin Wheatley, the FSA's managing director and CEO-designate of the Financial Conduct Authority (FCA), said: "These new rules will help create a more sustainable market that works well for everyone, whether they are a borrower or a lender.

"We recognise that many lenders are now using a far more sensible set of lending criteria than before, but it is important that these common sense principles are hard-wired into the system to protect borrowers."

The Council of Mortgage Lenders (CML) has welcomed the 'clarity' that the future mortgage rules are set to bring, hailing it as a move that will guarantee 'responsible lending'.

Paul Smee, CML director general, commented: "Today's rules bring certainty. Lenders can now make firm plans to ensure that they meet the new requirements when they formally come into place in April 2014. In practical terms, the regulatory changes have already been widely anticipated and so are unlikely to create any significant additional or unexpected impacts."

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