The Financial Services Authority (FSA) have announced plans to ban self certified home loans in a bid to limit the amount of mortgage lending.

The FSA is said to be “adamant” that it will impose new rules that will ban mortgage lending without proof of income or so-called ‘self-certified’ loans.

The UK financial watchdog has said it wants to bring in the new restrictions to ensure that lenders are only giving home loans to those who can afford to repay it. It insists that this can only be done with prior knowledge of a borrowers financial situation, which will effectively put an end to self-cert mortgages.

Self-certified loans mean that home loans are given out on the basis of the borrowers statement of their income, but they do not currently need to provide any proof of this. In the first quarter of the year this type of mortgages still accounted for 43% of the total number of mortgages taken out.

The FSA has said it wants to get “back to the basics of responsible lending” and prevent people getting into debt problems as a result of not being able to afford their mortgage.

Lesley Titcomb, of the FSA, 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 it,”
The new proposal is part of an FSA review into the causes of UK debt over the past five years.

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