FSA confirms new mortgage market rules
New mortgage lending rules to better protect borrowers from risky lending will come into force in 2014, the Financial Services Authority (FSA) has confirmed.
The tougher rules will insist that all lenders check the borrower's ability to repay their mortgage, including their net income and basic expenditure.
Another top priority will be to help borrowers who may be caught by today's strict lending criteria.
The Mortgage Market Review (MMR) will come into effect on 26 April 2014 - later than originally anticipated - in order to put what the FSA called 'common sense' back into the market and to avoid the 'poor practices of the past.'
Lenders will no longer be able to rely on rising house prices in the repayment of interest only mortgages and will have to take into account the impact that any future interest rate rises may have on repayment costs.
Managing director of the FSA and CEO-designate of the Financial Conduct Authority (FCA), Martin Wheatley said: "These new rules will help create a more sustainable market that works well for everyone, whether they are a borrower or a lender."
While the tougher lending rules have been designed to protect borrowers, research by YouGov found that the new rules may make it even harder for the four in ten young adults (18-24 year olds) that want to move out of their parents' home but cannot afford to do so.
Elsewhere in the research, being able to afford to buy or rent a property was a top concern for 46 per cent of young Britons. While half of those questioned said they hoped to move out of their parents' home within the next two years, over four in ten (43 per cent) do not expect to own their own home until they are over 30, if at all.