FSA Publishes Mortgage Market Review

2nd November 2012

The Financial Services Authority (FSA) has published its Mortgage Market Review (MMR), indicating that tight lending conditions may finally ease up for first-time buyers and so-called ‘mortgage prisoners’.

The new rules on mortgage lending, which come into effect on 26 April 2014, herald a more ‘common sense’ approach to the mortgage market, according to the FSA, and amongst other changes, do not prevent higher loan to value mortgages being offered to struggling first-time buyers.

This is particularly crucial as according to the Yorkshire Building Society, first-time buyers take an average of eight years to gather the average deposit of 20%.

Lenders will be given the flexibility to decide what type of evidence of income to accept from self-employed workers, who have traditionally had to produce two or three years’ accounts as evidence, compared to a little as three months of pay slips/bank statements required by other applicants.

The new rules mean that customers with an impaired credit history will be eligible for a mortgage, as long as they are able to afford it.

Lenders will also be able to make exceptions to the responsible lending rules for customers who need to remortgage, sometimes known as ‘mortgage prisoners’. This will be on the provision that the outstanding amount to be repaid does not increase.

“These new rules will help create a more sustainable market that works well for everyone, whether they are a borrower or a lender,” said Martin Wheatley, managing director of the FSA and CEO-designate of the Financial Conduct Authority.

“We recognise that many lenders are now using a far more sensible set of lending criteria than before, but it is important that these common sense principles are hard-wired into the system to protect borrowers.

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