Posted on 13 July 2010 by
Below is today’s press release from the FSA on its proposed changes to the mortgage market, followed by an amended version of what I think it meant to say but was too shy to do so:
FSA moves to make sure all borrowers with a new mortgage can afford it
The Financial Services Authority (FSA) has today outlined proposals to ensure all mortgages are carefully assessed to make sure borrowers can afford them.
Reflecting the FSA’s enhanced consumer protection strategy and intensive day-to-day supervision, the proposed changes aim to ensure all lenders get back to the basics of responsible lending and that problems are prevented before they can develop or get out of control.
Some of the key proposals include:
The tough new proposals, published in the consultation paper, form part of a major review by the FSA into the UK mortgage market and are based on detailed analysis of the past lending decisions, looking at the causes of arrears and repossessions since 2005.
The FSA found that:
Lesley Titcomb, FSA director responsible for the mortgage market, said:
“There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back.
“While it is clear the mortgage market has worked well for many, we need to build a strong new framework to protect mortgage customers and to ensure that the problems we have seen in the past do not happen again, particularly as the mortgage market recovers.”
Today’s report also includes the key findings from the FSA’s review into arrears charges, which indicated significant variation in the level of arrears fees across the market.
The mortgage rules require arrears charges to be based on a reasonable estimate of the cost of the additional administration required as a result of the customer being in arrears.
The FSA is actively seeking views from consumer groups and industry and invites responses by 16 November 2010.
Andrea Kinnear| Press Office | Communications Division |
The Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel: 020 7066 3430
What I think the FSA meant to say:
FSA moves to make sure all borrowers with a new mortgage can afford it
The Financial Services Authority (FSA) has today outlined proposals to ensure all mortgages are carefully assessed to make sure borrowers can afford them.
Reflecting the FSA’s enhanced consumer protection strategy and intensive day-to-day supervision, the proposed changes aim to ensure all lenders get back to the basics of responsible lending and that problems are prevented before they can develop or get out of control. (This is admittedly shutting the door after a very small horse has bolted and if we had any examples of current lenders which haven’t already got back to so called basics we would give them to you, but we haven't and so we can't)
Some of the key proposals include:
The tough new proposals, published in the consultation paper, form part of a major review by the FSA into the UK mortgage market and are based on detailed analysis of the past lending decisions, looking at the causes of arrears and repossessions since 2005. However, we recognise that most problems were due to a change of personal circumstances, such as a relationship breakdown or redundancy, not due to bad original lending decisions and appreciate that lenders can’t be expected to factor in the risk of divorce in their underwriting process.
The FSA found that:
Lesley Titcomb, FSA director responsible for the mortgage market, said:
“There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back.
“While it is clear the mortgage market has worked well for many, in fact the vast majority, we need to build a strong new framework to protect mortgage customers and to ensure that the problems we have seen in the past do not happen again, particularly as the mortgage market recovers.”
Today’s report also includes the key findings from the FSA’s review into arrears charges, which indicated significant variation in the level of arrears fees across the market.
The mortgage rules require arrears charges to be based on a reasonable estimate of the cost of the additional administration required as a result of the customer being in arrears.
*Extract from FSA press release dated 13/12/06: http://www.fsa.gov.uk/pages/Library/Communication/PR/2006/134.shtml
Consumers taking out interest-only mortgages generally have a reasonable understanding of the risks involved but a significant minority do not have a robust repayment strategy in place, the Financial Services Authority (FSA) said in a report today.
Research in the report tested how borrowers, who had recently taken out an interest-only mortgage, planned to repay the loan and the extent to which those consumers understood the risks associated with this type of borrowing. 24% of new mortgages are taken out on an interest-only basis.
The research found:
Commenting on the research Clive Briault, Managing Director of Retail Markets at the FSA, said:
"There is nothing wrong with interest-only mortgages. However, consumers must be very clear about how they are going to repay the loans they take out. Consumers' repayment plans need to be realistic and robust. Consumers should not, for example, assume that house prices will continue to rise at the rate seen in recent years."
Categories: Property market, Buy to let, Mortgages, Regulation
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Joe Downs10/09/2010 04:15
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