Five questions answered on the new mortgage rules

Will affect 1 million borrowers.

The FSA has announced they will be introducing a new set of rules for mortgage lending. We answer five questions on these new rules.

What is the basic gist of the new rules?

Borrowers must satisfy mortgage lenders they can repay the mortgage – mortgage lenders must in turn check these assurances. Those looking to borrow from an interest only mortgage must prove they are not relying on rising house prices alone to repay the home loan. There will be no age limit on taking out a mortgage. If you earn more than £300,000 or have more than £3 million in assets you will face a less stringent assessment. Borrowers trapped in old mortgage deals will be given some leeway to remortgage, despite these new laws.

Why are the FSA introducing these new rules?

To curb risky lending. The FSA want to encourage more responsible lending and borrowing in the mortgage market to avoid a repeat of risky lending that saw many homes on the brink of being reposed during the financial collapse.

When these new regulations come into action?

These new regulations will come into effect on the 26 April 2014. However, many of these practices are already being used by mortgage lenders.

What will this mean for people trying to get on the property ladder?

That it will be a longer, more thorough process getting a mortgage and self-certified mortgages – where the lender does not seek proof of income – will effectively be ruled out. This may make it harder for around 11.3 per cent of borrowers (1.3 million) and in particular self-employed workers to get a mortgage.

What have the FSA said?

Martin Wheatley, managing director of the FSA 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.

“We want borrowers to feel confident that poor practices of the past, which led to hardship and anxiety, are not repeated.  At the heart of the new measures is an affordability test to check borrowers can meet the repayments of the mortgage they want.

“To ensure the measures are effective but practical we spent a great deal of time discussing our proposals with consumers, firms, parliamentarians and numerous other stakeholders. I am therefore very confident that we have come up with a set of rules that are proportionate and sensible, and will create a more sustainable mortgage market where consumers are put at the heart of every decision.”

The FSA have announced new rules. Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

Photo: Getty
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Cabinet audit: what does the appointment of Liam Fox as International Trade Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for International Trade.

Only Nixon, it is said, could have gone to China. Only a politician with the impeccable Commie-bashing credentials of the 37th President had the political capital necessary to strike a deal with the People’s Republic of China.

Theresa May’s great hope is that only Liam Fox, the newly-installed Secretary of State for International Trade, has the Euro-bashing credentials to break the news to the Brexiteers that a deal between a post-Leave United Kingdom and China might be somewhat harder to negotiate than Vote Leave suggested.

The biggest item on the agenda: striking a deal that allows Britain to stay in the single market. Elsewhere, Fox should use his political capital with the Conservative right to wait longer to sign deals than a Remainer would have to, to avoid the United Kingdom being caught in a series of bad deals. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.