The Financial Services Authority (FSA) has softened its proposals for mortgage regulation, which many feared would stifle the house market because they were so restrictive.
Under the new guidance, the FSA is proposing to keep interest-only loans. The guidance also softens the FSA’s previously hard-line stance on the mortgage market to help homeowners re-mortgage or move home.
Lenders will now be allowed to give existing customers new mortgages even when they do not meet the new, more stringent affordability requirements being introduced by the FSA.
This will prevent the creation of a group of ‘mortgage prisoners’ who would no longer qualify for a new mortgage. There were fears that this group of people could be trapped in their existing property, even if it was no longer suitable for their needs, because they would not be able to access new mortgage lending.
Stephen Ludlow, Chairman of ludlowthompson, comments: “Thankfully the FSA has rowed back on some of its more stringent proposals for the mortgage market.
“While the residential property market would welcome effective regulation designed to stamp out the worst abuses we saw at the height of the credit crunch, no one wanted to see the baby thrown out with the bathwater.”
“The FSA was at risk at stifling the house market, which is struggling outside of London. These revisions to its proposals are a sensible step forward.”