Sunday, April 3, 2011

FSA performs spectacular U-turn

Watchdog to back down on mortgages

The Financial Services Authority has been conducting a mortgage market review which threatened to restrict home loans to gold-plated applicants only, turning the clock back nearly half a century. Initially, the watchdog stood firm in the face of criticism that its plans would cause enormous hardship for millions of borrowers who would be trapped in homes they could not escape from. Repossessions might have surged as interest rates climbed, and borrowers on expensive deals were unable to remortgage. However, in its recently published business plan for 2011/12, the FSA finally appeared not only to be backtracking, but reproached the mortgage industry for taking the conclusions of its review for granted.

Posted by drewster @ 11:58 PM (1779 views)
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12 thoughts on “FSA performs spectacular U-turn

  • ‘THE retreat has been sounded over ‘draconian plans’??? to clamp down on mortgage lending, giving a much-needed boost to the housing market.’

    ~ Why does the FSA exist over and above being used as a handy scapegoat to shield finance criminals?

    A serious question.

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  • ontheotherhand says:

    It’s amazing how Vested Interests make themselves believe their rants. I mean, how are, ‘stringent affordability tests’ be a bad thing? Either you can afford a loan or not and checking that thoroughly just saves the deluded from themselves. It’s the word ‘stringent’ they don’t like, I assume because some gentle cheating should be allowed? Presently, the lenders can bake future assumptions of house price growth into their affordability ratio. I’m sure that when that growth doesn’t appear forever owing to exponentiality, the borrower will wail, ‘the lender made me take it, they didn’t check I could afford it, they assumed prices rose forever.’, and we the taxpayer will bail them out… Would the same people like the word ‘stringent’ in the following or not I wonder?
    Stringent Immigration checks
    Stringent Planning Laws

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  • sibley's b'stard child says:

    • Ban self-certification mortgages. This would have posed serious difficulties for the self-employed

    • Stop interest-only loans

    • Introduce stringent affordability tests

    • Permit loans on a 25-year term only

    • Outlaw 100 per cent loans and make other high-value advances difficult

    • Insist that all income declarations be verified, adding to costs for borrowers, and providing extra difficulties for the self-employed and those who rely on overtime and bonuses

    • Refuse mortgages to anyone over 40

    That anyone could find fault in these suggestions tells you all you need to know about where their interests lie. Although it’s not yet a foregone conclusion, shame on FSA for buckling under the self-interested VI circus.

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  • • Refuse mortgages to anyone over 40

    In my readings of the various FSA consultation papers, I never came across this one. Can anyone else verify that this was proposed?

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  • mark wadsworth says:

    SBC, remember – loan-to-value limits are for the benefit of banks; loan-to-income limits are for the benefit of borrowers.

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  • sibley's b'stard child says:

    Jack will know if he’s knocking about.

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  • sibley's b'stard child says:

    Aye MW, I guess it’d be naive to think otherwise.

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  • 2. sibley’s b’stard child said…shame on FSA for buckling under the self-interested VI circus.

    ~ Just doing our jobs mate! See my first comment. I have a very strong feeling that I have nailed the FSA down.

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  • “Refuse mortgages to anyone over 40” – can’t say I’ve seen this proposal before and I dont think they would get away with it anyway (age discrimination etc) – it could become a guidline in conjunction with ensuring affordability in retirement if the mortgage were to stretch that far. Having said that with the current Government (IDS) retirement proposals we’ll soon be able to have a mortgage to age 95 !

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  • mark wadsworth says:

    Yes, the “no mortgages for over 40s rule” seems a bit harsh. A better rule would be “mortgage to be paid off before borrower hits age 60, or 20 years maximum repayment, whichever is the shorter”.

    So there’s no harm in 50 year old trading up and taking out a £50,000 loan if he can repay it over ten years and has no existing mortgage.

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  • hey jack – didnt t part of the FSA’s review into endowment mortgages conclude that it was prima facie miss-selling for endowments to pay off loans to vest after the 65th b/day?

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  • @techieman – the FSA have had so many reviews it’s almost impossible to keep up and I cant remember off the top of my head the outcome of the review you specifically mention above but I suspect you will have done your homework on this matter. Common sense tells us that its not a good idea to be lending money to people where the loan extends into retirement as most people see a substantial drop in income. For once the FSA actually came up with some useful proposals in the MMR but it all looks far too radical for the VI’s who sense that it would further reduce volume within the mortgage market. It will be interesting to see what actually comes into being on this one.

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