Richard Wollacott

Partner

Residential Property


New mortgage rules set for 2014

Richard Wollacott

Tougher rules on UK mortgage lending were confirmed at the end of October 2012 by the Financial Services Authority (FSA). 

From April 2014, when you apply for a mortgage you will face far more detailed questioning to prove whether you can afford the loan. Mortgage lenders will examine your income and outgoings with more scrutiny, all in an attempt to stop a resurgence in risky mortgage lending seen during the last housing boom. 

Previously, the FSA claims lenders were handing out mortgages without proper checks on a borrowers’ real ability to repay the loan, relying too heavily on rising property prices and sale by the end of the mortgage term to cover the costs. 

Self-certified mortgages will be as good as banned, so borrowers cannot exaggerate their income and end up with loans that total many multiples of their income. 

A summary of the new rules are:

  • Mortgage applicants must satisfy lenders that they can repay a mortgage, and lenders must check these assurances
  • Interest-only mortgage customers must prove they are relying on more than just rising house prices to repay a home loan
  • So-called ‘mortgage prisoners’ on old deals will be given some leeway to remortgage, even if they would normally fall foul of the new rules
  • No age limit will be set on when a borrower can take out a mortgage
  • Those with an annual income of more than £300,000 or with more than £3m in assets will face a less stringent affordability check

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