Fears for mortgage lending under proposed reform

| October 5, 2010 | 0 Comments
Fears for mortgage lending under proposed reform

The Council of Mortgage Lenders (CML) has today warned that proposals by the Financial Services Authority (FSA), to encourage responsible lending, could mean even more buyers are locked out of the market.

City Watchdog, the FSA, has previously announced plans to restrict mortgage lending, in a bid to prevent reckless borrowing.

The FSA has already proposed affordability tests for all mortgages to ensure that lenders get “back to the basics of responsible lending”.

It also wants mortgage customers to verify their income and this could see the end of self-certification loans - where no proof of income is required.

However, according to the CML, if these restrictions would have been in place from 2005 to 2009, about half of all mortgages would have been blocked.

In the four year period to March 2009, approximately 3.8 million mortgages would not have been approved if banks and building societies had been forced to adopt these restrictions, according to the Council.

While the FSA has defended the proposals, the CML argues that the restrictions would be far too strict and are, therefore, unnecessary.

The CML’s comments come just a week after the Bank of England’s Credit Conditions report revealed that home loans will continue to be less readily available in the coming months.

The uncertainty surrounding the economy is expected to constrain the availability of mortgage in the next few months, said the report.

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