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Fsa Climbdown On Mortgage Reforms

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http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=518584

Borrowers offered a mortgage lifeline

By Jo Thornhill

21 November 2010

Reader comments (16)

Millions of borrowers who feared that they could be shut out of the property market have been thrown a lifeline.

Thrilled: Nicola Mossman and Thomas Dunlea fought to get a mortgage

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Interest-only borrowers, the self employed and first-time buyers without a chunky deposit or wealthy parents all stand to benefit after the Financial Services Authority climbed down over its plans to push through its controversial Mortgage Market Review reforms.

The City regulator is determined to stamp out irresponsible lending by imposing more stringent affordability checks on all borrowers.

But following an outcry from the FSA's own Consumer Panel to halt the proposals, the FSA has agreed that it needs to take more time to look at all the possible consequences of stricter regulation.

The FSA has said that it intends to publish more detailed analysis and final proposals before next summer.

It could provide a window of opportunity to struggling first-time buyers and those needing to remortgage, among others, who are concerned that they will not meet stricter affordability criteria.

Under the FSA's proposals, lenders would use specific tests when assessing a borrower's ability to repay their mortgage.

Affordability would be based on a repayment basis over 25 years for all consumers, taking into account a borrower's daily household budget and expenditure, even if customers want to take out a mortgage over a longer term or on an interest-only basis.

And the test disregards the possibility that borrowers are able to cut down on discretionary spending, after they purchase a home or move up the housing ladder.

First-time buyers, interest-only borrowers and the self employed would be the hardest hit under this regime. But the Consumer Panel has pointed out that even borrowers already on the housing ladder could struggle to remortgage.

The rules would mean less innovation and less flexibility in the market at a time when many borrowers, particularly those with little equity, are struggling to remortgage at a reasonable cost.

'We welcome the FSA's decision to take more time in assessing the full impact of the MMR,' says Adam Phillips, chairman of the Consumer Panel. 'It is essential that the regulator assesses the possible unintended consequences and side-effects of its proposals for the rest of the market.'

We had a £24k deposit but still got turned down

Self-employed dance teacher Nicola Mossman, 25, and her partner, Thomas Dunlea, 28, who works in post-production for a television company, have just moved into their first home in Rickmansworth, Hertfordshire.

They are thrilled to have made the first step on to the housing ladder and say it was a struggle to get the 15% deposit required, saving hard for many years and also borrowing from family.

Under the FSA's new proposals, the couple believe they could have been shut out of home ownership for many years.

Despite putting up a £24,000 deposit on their £164,000 property and the mortgage repayments being well within their monthly budget, Nicola and Thomas were turned down by the first lender they approached. They eventually secured a two-year fixed-rate deal at 5.69% with Halifax.

'I was able to show three years of accounts from my business, and Thomas and I have a good credit record, yet one lender still wouldn't offer us a mortgage because we were first-time buyers,' says Nicola.

'If affordability checks are made stricter it will hamper the market even more. First time buyers are the lifeblood of the market.'

Edited by pete.hpc

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An absolute disgrace. The vested interests have got their way..... yet again.

I really despair of this country. Despair.

nonsense...the FSA have "raised an eyebrow" at the lending practices.

that should deter.

Athough I think there maybe a shortage of Botox as bankers send FSA officials to the clinic for treatment.

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There's no actual news underlying this article. Nothing has been decided by the FSA, and so there is no basis for saying that there has been a 'reprieve' for dodgy borrowers.

The only thing which is close to being 'news' is a statement that the consultation period has been extended. I haven't seen that mentioned anywhere else, but it may well be true.

I also loved this quote "The rules would mean less innovation and less flexibility in the market at a time when many borrowers, particularly those with little equity, are struggling to remortgage at a reasonable cost." Got to love mortgage market innovation.

Edited by WageslaveX14

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"Self-employed dance teacher Nicola Mossman, 25, and her partner, Thomas Dunlea, 28, who works in post-production for a television company, have just moved into their first home in Rickmansworth, Hertfordshire."

Well, they're a solid gold prospect, aren't they? I mean, people will always need dance lessons and TV programmes, and it's not as if there's any real competition in those kind of jobs. If I were a banker, I'd lend them the money tomorrow.

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That being said most of the FSA ideas have already been taken on by the banks. Abbey for example is like dealing with the 1970's Version. Working out mortgage affordability at 6% on a full repayment basis regardless of rate. Looking at dependants and current debt. There is virtually no lender that will lend about 75% at Interest only. I can assure you today is a million miles away from 18 months ago and most of the FSA's wishlist is already in play.

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That being said most of the FSA ideas have already been taken on by the banks. Abbey for example is like dealing with the 1970's Version. Working out mortgage affordability at 6% on a full repayment basis regardless of rate. Looking at dependants and current debt. There is virtually no lender that will lend about 75% at Interest only. I can assure you today is a million miles away from 18 months ago and most of the FSA's wishlist is already in play.

that's ok. I read today that the banks will open their wallets and lend like it is 2006 again now that the FSA are looking at this again

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There's no actual news underlying this article. Nothing has been decided by the FSA, and so there is no basis for saying that there has been a 'reprieve' for dodgy borrowers.

The only thing which is close to being 'news' is a statement that the consultation period has been extended. I haven't seen that mentioned anywhere else, but it may well be true.

I also loved this quote "The rules would mean less innovation and less flexibility in the market at a time when many borrowers, particularly those with little equity, are struggling to remortgage at a reasonable cost." Got to love mortgage market innovation.

+1

Innovations like "shared ownership", "self-certification" and "mortgaged backed securities"?

We've already had "the bank of mum and dad" and Boulger has recently suggested "the bank of grandma and granddad".

What next: grave robbing deceased relatives to get at their gold fillings?

Daily Mail: "Never had it so good: Great-grandparents give their eye teeth for modern luxury apartments".

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There's no actual news underlying this article. Nothing has been decided by the FSA, and so there is no basis for saying that there has been a 'reprieve' for dodgy borrowers.

The only thing which is close to being 'news' is a statement that the consultation period has been extended. I haven't seen that mentioned anywhere else, but it may well be true.

I also loved this quote "The rules would mean less innovation and less flexibility in the market at a time when many borrowers, particularly those with little equity, are struggling to remortgage at a reasonable cost." Got to love mortgage market innovation.

This is what the FSA actually said in a speech last Thursday to the CML conference after the close of the the consultation:

http://www.fsa.gov.u...0/1118_sn.shtml

There are lots of good figures and plenty of quotes to warm HPCers hearts...

The realist knows there is plenty of evidence showing that lending at the level seen in 2007 was unsustainable. The fall away since has been dramatic - but not all lending has been affected in the same way. What we saw was lending quality decreasing as firms with cheap funding sought out new borrowers, and competition for these borrowers fed back into a further loosening of pricing and credit standards. Product developments bore this out, so we saw a huge increase in adverse loans and credit impaired buy-to-let mortgages, among others.

Another myth in the mass market is the conclusion that 50% of borrowers who would have previously got a mortgage will not get a loan if the MMR is implemented. Our data does not bear that out at all - we have never disputed that our decisions and rules, particularly those on affordability, will have an impact on the availability of mortgages in the market. But that impact may be that instead of getting a loan of £100,000, borrowers get one of £95,000 or £90,000.

It's also suggested that those who may have greatest cause to fear are those looking to get on the property ladder. We don't think that things will be as black as they have been painted for these borrowers.

Lending for house purchase has remained relatively stable. It has now almost returned to the average level over the last five years. Between 2005 and 2010 the average level of lending for house purchases was £9.5bn. In July 2010, this lending reached £8.4bn - so not as low as some would have us believe.

So the reality is that while outstanding mortgage balances trebled from £400bn to £1.2 trillion in the ten years up to 2008, home ownership has remained relatively static, and homeownership with a mortgage has steadily declined.

Instead, this growth in lending came from increased levels of remortgaging and buy-to-let mortgage sales. As you know only too well, lending in both areas remains subdued - by the downturn in the market and the shortage of mortgage funding. Neither of these issues can be solved by conduct regulation.

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An absolute disgrace. The vested interests have got their way..... yet again.

I really despair of this country. Despair.

Calm down, Eric. THe banks aren't suddenly going to start lending silly money again anytime soon.

Their agenda re: mortgages is clear - whatever the benign FSA decide - and that's to suck in as much cash via low LTV loans as possible.

Anyone without at least 20% deposit is going to be paying a premium for years to come.

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Let us not forget who the FSA owe a lot of money to. IIRC they re-jigged a lot of their loands last year with a few of the usual suspects ?

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The only thing which is close to being 'news' is a statement that the consultation period has been extended. I haven't seen that mentioned anywhere else, but it may well be true.

Giving the prudent (of which there are precious few) more time to acknowledge their mistake and get out of their interest only or 100% LTV mortgage by selling and minimizing their losses. I imagine few will take this opportunity and there will be much crying in the future.

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Calm down, Eric. THe banks aren't suddenly going to start lending silly money again anytime soon.

Their agenda re: mortgages is clear - whatever the benign FSA decide - and that's to suck in as much cash via low LTV loans as possible.

Anyone without at least 20% deposit is going to be paying a premium for years to come.

Yeah - but there always those dodgy moneylenders waiting to pounce - they are all over the shop - STILL. :angry:

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