FSA mortgage reforms still too stringent
- 11th April 2012
- Buying Property News
Lenders concerned that new mortgage market rules may delay home buyers’ purchases.
The Financial Service Authority (FSA) recently announced a further shake-up of its new rules for the mortgage market, which have prompted concern amongst lenders.
They are concerned that the FSA’s “Mortgage Market Review” could put a dampener on the number of house purchases despite the FSA softening its original proposals.
One of the biggest concerns regarding the FSA’s new rules is that homeowners may become ‘trapped’ with their original mortgage because they will struggle to re-mortgage under the new regulations.
In its response to the FSA’s final consultation, the Council of Mortgage Lenders (CML) has raised concerns that the FSA’s package of reforms is too risk averse and could reduce lending to a wide range of creditworthy home buyers simply because their financial circumstances are not straightforward.
While a threat to some borrowers, the reforms are undoubtedly good news for buyers and investors who only need to borrow a small amount of money, who will find themselves in a much stronger negotiating position.
All borrowers are likely to face tougher questioning because of the FSA’s guidelines requiring borrowers to receive advice following any ‘spoken or interactive dialogue’ with the lender.
Both the CML and the Building Societies Association (BSA) believe that these guidelines do not sufficiently recognise the distinction between those consumers who may need protection and more sophisticated borrowers, who do not.
Stephen Ludlow, Chairman of ludlowthompson comments, “While everyone in the property industry agrees that reform is needed, it’s possible the FSA’s new guidelines might cause unnecessary problems for buyers who really should qualify for a mortgage.
“Sophisticated borrowers who have a lot of experience in buying residential property will resent any delays to the borrowing process caused by bureaucratic extra checks demanded by the FSA.”
It’s possible the FSA’s new guidelines might cause unnecessary problems for buyers who really should qualify for a mortgage.
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