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News: Self-Cert Mortgages Could Be Banned

Tue, 20 Oct 09

Self-certification mortgages will be banned under proposals being put forward by the Financial Services Authority (FSA).

The financial regulator is looking at plans to regulate mortgages and wants to see an end to self-certification mortgages, with lenders instead required to verify borrowers’ income and better assess their ability to pay back the loan.

The plans have been revealed in the FSA’s Mortgage Market Review consultation document. The mortgage industry has until January next year to respond to the proposals.

The Council of Mortgage Lenders has welcomed the FSA’s call for greater clarity in the mortgage market.

Michael Coogan, CML director general, said: "We agree with the FSA that regulation in itself cannot resolve the problems of the recent market. However, we also agree that clearly delineated responsibilities, which remove regulatory ambivalence, will help lenders, intermediaries and consumers to know where they stand, and to accept the consequences of their actions. As always with regulatory change, the devil may be in the detail.”

Angela Knight, chief executive of the British Bankers’ Association warns that the plans could unfairly penalise self-employed borrowers and first-time buyers, who had relied on self-certification mortgage deals to secure a home during the recent housing market boom.

She told BBC Radio 4’s Today programme that it was important that the FSA gets “the balance right, so that people who deserve a mortgage because their income warrants it don't find themselves ruled out of obtaining it by new rule changes."

 

By Joe Lepper

 

See also: Mortgages

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