New Rules For UK Lenders
The Financial Services Authority (FSA) have outlined new tough measures for mortgage lenders in a bid to shake up the UK mortgage market
New mortgage lending rules effective from April 2014 are intended to prevent irresponsible lending and means that borrowers can only take up deals that they can prove they can afford.
The long-running review by the FSA aims to bring common-sense and responsibility back to the UK mortgage industry following the meltdown observed since the property crash in 2008.
One new measure that will come into effect today (1st November 2012) means UK lenders will not be able to take advantage of borrowers unable to get a mortgage elsewhere.
The new ruling is intended to protect borrowers already trapped in mortgage deals with their current lenders, as well as those who may end up stuck when the new rules come in to force.
The FSA want to get lenders to treat all borrowers the same and want to avoid lenders treating new applicants less favourably than other similar customers, e.g. Offering them a higher interest rates or worse repayment terms.
From 2014, mortgage lenders will have to consider an applicant’s income and outgoings and mortgages that are on an interest-only basis will only be offered to borrowers with a solid repayment plan, rather than relying on UK property prices rising (capital appreciation).
Mortgage lenders will also have to factor in any impact that future interest rate rises could have on repayment costs.
The new rules will affect over 9 Million mortgaged UK households and will also have a serious impact on would be buyers who are currently trapped in the private rental sector (PRS) because they are unable to afford to buy a property due to higher mortgage costs and the extortionate cost of deposits.
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