21 October 2009

BBA statement on FSA mortgage market review

The issue currently facing lenders, borrowers and regulators is how to ensure that the risk of taking out a mortgage is shared effectively between all parties. Any new rule must not create unreasonable obstacles for lenders or borrowers.

The FSA proposal consists of major reforms required in the UK mortgage market to ensure that it works better for consumers and is sustainable for all market participants.

The review’s key features are:

·         imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay;

·         banning ‘self-cert’ mortgages through required verification of borrowers’ income;

·         banning the sale of products which contain certain ‘toxic combinations’ of characteristics that put borrowers at risk;

·         banning arrears charges when a borrower is already repaying, and ensuring that firms do not profit from people in arrears;

·         requiring all mortgage advisers to be personally accountable to the FSA;

·         calling for the FSA’s scope to cover buy-to-let and all lending secured on a home.

The BBA stated that:

 

·         "It is the shared responsibility of all of us to ensure that any money we borrow can be repaid in full. And it is the responsibility of lenders in this downturn to ensure that as far as possible funds are made available to those who can expect to repay them over time”.         

·         "For some time now the banks have been providing the vast bulk of mortgage funding to the market, as many building societies and specialist firms have stopped lending. When they offer mortgages, the UK's high street banks pay particular attention to their affordability for each individual customer, considering a range of factors which is not limited to salary multiples or loan-to-value ratios. Therefore the banks welcome the FSA's similar emphasis in this paper on the overall affordability of the mortgage for the customer, and their focus on mortgage broking activity and higher-risk lending”.

·         "It should be a firm principle of mortgage regulation that higher-risk borrowers such as self-employed people and first-time buyers are not effectively cut out of the market. The issue that faces all of us - lenders, borrowers and regulators - is ensuring the risk of taking out a mortgage can be shared effectively. Any new rules must not serve to create unreasonable obstacles either for lenders or for borrowers."

 

Press release

 

FSA Mortgage Market Review

 

© FSA - Financial Services Authority