New mortgage rules—a move in the right direction?

New mortgage rules—a move in the right direction?

mortgageFollowing new mortgage rules introduced by the Financial Conduct Authority (FCA) last month, Graham Walters, partner within the banking and lending services group at TLT Solicitors, and Emily Benson, partner within the financial services regulatory team, also at TLT, discuss what the impact will be on the different parties affected.

Borrowers will have greater certainty about whether they can afford their mortgage in the event of future interest rate rises, as a result of changes to FCA rules which came into force on 26 April 2014. The changes are a result of the FCA’s mortgage market review (MMR) and will also mean most people will now get help from an adviser before taking out a mortgage.

What is the background to the new rules?

Graham Walters (GW): In the period up to 2008, mortgage lending criteria was very relaxed with high risk lending and borrowing going on. There was concern that failure to adequately assess affordability had caused severe hardship to some individuals in terms of the level of debts that they were carrying and for some, it resulted in repossession of their property.

The Financial Services Authority as it was back then, the FCA now, felt that a lot of poor practices had crept in to the mortgage lending market and so in 2009 they kicked off a full review of the market and after consultation with the industry final rules were published in October 2012. Those rules were implemented on 26 April 2014.

Who will it affect?

GW: The rules apply to the residential mortgage industry rather than commercial lending. Within the residential mortgage industry I think it affects everybody—lenders, intermediaries and ultimately the borrowers.

Lenders have really had to tighten up on their underwriting processes and they have an obligation now to ensure that loans are affordable. I think that is what has driven a lot of the press comment that we

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