A wide-ranging shake-up of the mortgage market has been unveiled today by the financial services regulator FSA, aiming to prevent a return of irresponsible lending and stop borrowers taking out deals which turn out to be unaffordable.
The new rules spell the end of self-certification mortgages, often used by the self-employed, and also the end of “fast-tracked” mortgages, an accelerated approval process under which verification of income may not be asked for at the lender’s discretion. Self-certification mortgages have sometimes been dubbed “liar loans” because applicants declare their own earnings.
It estimated that up to 15% of borrowers who took out mortgages between 2005 and 2010 could be in negative equity and also expressed concern about borrowers who are “trapped” into paying a high interest rate by their current lender because they are unable to go elsewhere.
Bruce Attwood of Berriman Eaton commented: “The FSA confirming that all self certificate mortgages will no longer be offered will have a negative impact on the housing market as so many self employed opt for this type of mortgage. The mortgage availability has been a real issue in recent times and is looking likely to become even tougher.“