The FSA plan to publish proposals to include buy-to-let regulations and second charges secured on homes, say reports by The Independent. The FSA are blaming the global economic crisis on poor regulations for home lending, and they plan to clamp down on mortgages.
Another consideration by the MD of the FSA is to restrict the amount that can be lent on a mortgage, limiting the number of multiples of the buyer’s income or the percentage of the value of the property. Loans to subprime borrowers and mortgages loaned without proof of income will be shortened.
The FSA are trying to rule out 5 times multiples of income and 125% loan to value mortgages in the future. The mortgage market was being reviewed before the credit crunch had started, but has since seen the collapse of Bradford & Bingley and Northern Rock. Greedy borrowers and lenient rules were to blame, according to the FSA. Some were lying on self-certification forms in order to get higher loans.
Lenders must make clearer explanations about the risks and the costs involved in mortgages. Although FSA regulation left out buy to let mortgages, as they are property investment loans rather than owner dwellings, it’s thought that the FSA will now recommend this is looked at also.
The FSA also wants to control secondary loans that are secured against a property, and says that such loans add to the borrower’s debt.