MORTGAGE lenders have largely welcomed a shake-up of the financial market aimed at preventing a return to irresponsible lending.
The Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) said they supported the new measures announced yesterday by the Financial Services Authority (FSA).
In its Mortgage Market Review, the FSA said income will have to be verified in all applications – spelling the end of self-certification mortgages.
Interest-only mortgages will only be offered where there is a credible plan to repay the capital, preventing borrowers from relying on "uncertain" rising house prices. The CML said the new regulations would help customers to find suitable mortgages using sensible safeguards.
Paul Smee, director-general of CML, said: "Lending needs to be responsible and done in a way that protects consumers. Rules need to be practical and avoid unintended consequences.
"While there is much detail to be pored over, the FSA's new proposals seem to strike broadly the right balance. If lenders are to make their contribution to improving the supply of housing and to the wider agenda for economic growth, they need a regulatory framework which also supports that objective."
Paul Broadhead, BSA head of mortgage policy, added: "The new regulations appear to have struck a reasonable balance between allowing lenders flexibility when assessing affordability, while maintaining a sensible level of consumer protection.
"The transitional arrangements will help people who already have a self-certified mortgage – banned under the new proposals – re-mortgage to a more standard loan. Lenders will be able to take into account borrowers' repayment performance rather than a prescriptive set of income and affordability criteria."
The FSA report claimed that, while low interest rates have helped some borrowers, there are "real dangers" that problems are being stored away for the future.
The regulator warned that home owners may be at risk of failing to meet repayments once interest rates start to rise.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article