Mortgages could become harder to get, with one in ten borrowers currently eligible for a mortgage being turned down in future.
The Financial Services Authority this morning published its long-awaited Mortgage Market Review. Its own impact assessment says that the proposed reforms could strip £2.9bn out of the economy because it would mean fewer people buying and selling homes, and lead to a dramatic drop in mortgage lending, affecting one million borrowers.
The FSA’s final consultation paper is designed to put a permanent end to the lending excesses that were prevalent pre-credit crunch. But the crackdown could have a severe impact on the already ailing housing market.
Among its many recommendations is a new ‘affordability’ regime, which will include looking at a borrower’s household spending plus a ‘stress test’ for how a borrower would cope if interest rates went up. The incomes of older people, those aged 50-plus and coming up for retirement, would be particularly put under the spotlight.
Grenville Turner, chief executive of Countrywide, warned: “In an environment where lenders are already being extremely cautious with their lending criteria, by placing all affordability assessments at the doors of lenders’ risk teams, this could create an even stricter lending environment.”
The FSA’s proposals also stipulate that borrowers will not be able to factor in the possibility of future house price rises, but must be able to show other, more robust ways of being able to pay back their mortgage.
The responsibility for checking affordability passes from mortgage adviser to lender, and most mortgage sales will have to be advised rather than simply executed.
For mortgage prisoners in negative equity, there is a ray of hope in the proposals, which suggest that the usual affordability tests are waived for such home-movers, provided they have a solid track record of repayments.
For full coverage and analysis of the MMR, please go to our sister site, Introducer Today:
www.introducertoday.co.uk
Comments
Actually my rantrave fairy imposter looked like she was enjoying that tree stuffed up that I have had to remove, darn you rantrave, have to find something so masculine that it wont make me think of you.
So the banks now wont/cant lend......so there will be less sales in 2011 than in 2010 and there will be less sales in 2012 than in 2011. Not a nice situation for the EA's at all.
But rantrave will still not be happy till he gets "illegal to borrow money to buy property|"
What about a wall for the most stupid comments to build up over 2012, but let his count, priceless.
and you had still lost your marbles!
When I was a kid, the big kid who lived in the 'end house' beat all the other kids at marbles. No other kid, including myself had any marbles to play with.
End result: no-one played with the big kid anymore.
He was isolated in his marble wealth.
As I finally stuffed the Xmas tree up me fairy last night, topping out a splendid tree, I had this strange picture she was rantrave, no idea why but I giggle every time I look at it now!
Peebee you are right....some believe the banks did intentionally de-regulate the financial services Industry....this gave them the opprtunities to intice more people into a ponzi scheme by giving them credit they could not afford......see a program called Storyville - Inside Job.
The world does have a debt problem that will not easily go away......Western Governments can choose to confront it making billions of people in the west accept a lower standard of living while the few at the top maintain or increase there own.....or we can choose to postpone the pain and pass the problem on to future generations....or we can bring the people who caused it to account and punish them in way that redistributes the wealth they have....I think a combination of options 1 and 2 will be the route we choose unless something very weird happens!
Brit1234: Okay - seeing as it is the season to be jolly and all that, I'll enter into a bit of semi-intelligent debate with you. It's all I can muster today, I'm afraid - but hopefully it will provoke some interesting banter...
I watched the YouTube shenanegans - ALL THREE parts. Did YOU do the same, may I ask?
Made for car-crash TV - there's no doubt about it. Mortgage Advisers squirming like stuck pigs and telling people to tell pork pies - so I guess there is a 'piggy' vein to all of this.
The reason I say this is that when you watch the other two 'episodes', it is evident that the Advisers were actually 'piggy in the middle' in all of this. In ep 3, the intrepid reporter phones up a lender direct who tells him he can afford three quid fifty for a mortgage; but then confirms that he can go to a broker, self-certify - and get whatever his wildest fantasy figure may be!
Let's face it - the LENDERS set up these deals knowing fine well what would happen. Do you think that some clever FA took it upon him/herself to slide a few under the door then whispered it to all their colleagues in industry? Not a chance. Why else do you think that none of these FAs have been lifted, other than it was the lenders who advocated these loans in the first place?
But, as you know, Brit - TV LOVES to turn the heat up under the Estate Agency and Financial Srvices industries - just to hear the crackling! And as these industries are so accessible and open to undercover sting operations simply by the nature of their businesses, it is easy meat for little input.
I am NOT defending the practice, by the way. I have no reason to.
Simply trying to offer some balance to what is a very one-sided view of matters.
These proposals aren't going to affect buy to let much, but they're a nail in the coffin for lie to bet.
We're just too uptight about personal finances in this country. In Hungary, another country now staring down the economic abyss, banks were even advertising the wonders of self-cert mortgages:
http://www.youtube.com/watch?feature=player_embedded&v=OjXl61uKq8c
BRIT1234
Right, sensible trousers on, no being silly or horrid.
Shocking I agree, I shall risk the drubbing I will get if I say that self certs were are rare as rocking horse poo at Jonnie & Co Financial Services with the exception of the odd self employed / company directors (see note below from Tony on 2011-12-19 12:42:57 as an example) for whom such products were created for.
I also notice the film is almost 9 years old but as I guess you are using it as an example of historic issues that makes sense but we can agree that prices in Ealing have moved on a bit in 9 years so some poor teacher that kippered himself up with an un affordable mortgage back then is not likely to be in negative equity?
Anyway, to the point – I agree that responsible lending needs to be restored and as ive said below regardless of what the FSA say now lenders are ahead of them anyway.
What we all (including you) don’t want to see is this responsible lending get silly, I heard of a case recently where a previously made mortgage offer was withdrawn because the area the property was in was deemed as being risky if the client was to loose their (so far secure and long term public sector) job – the lender decided that they might struggle to get another one locally, and this was a nice 20% deposit plus costs, no un secured debt and comfy income multiples jobby.
You never know BRIT but many babies (like you) could get thrown out with the bathwater and you could find yourself unable to secure a final mortgage offer
If what you say about your self on here is true then when prices are at a level you are happy with you will buy and be a good solid buyer, the question at that point will be can you? Or is it a life of renting (German style I think ? Rantnrave can enlighten us on this point)
Prices aside this is something none of us want / we can agree on
Jonnie
Good news, I just wish it went further.
To anyone who doesn't see a reason watch the clip below and see if your opinion changes.
*WARNING* Do not watch if you are an Ealing Estate Agent!
http://www.youtube.com/watch?v=vT1UnGS91BY
Anonymous - a song from the Kaiser Chiefs ... a 'wise man' once said. Is the lyricist from the Kaiser Chiefs a 'wise man'?
"And if there's anybody left in here
Who that doesn't want to be out there"
Did you mistype that? If not, what on earth is it supposed to mean?
Right,
The wonder that is the FSA have turned up to the party late again, they come up with an idea and it’s taken so long the financial services industry is already doing it.
Now, these ones for the EA’s here – who has seen the following happen in their office in recent times;
1. Mortgage broker sees customer
2. Broker tells you it all okay and AIP / wont be a problem
3. Customer comes back to see broker with bits of paper
4. Broker does a fair bit of photocopying
5. Bit of time passes (days)
6. Lots of noise banging and swearing from brokers office – he’s flipping furious
7. You join your broker having a fag in the car park
8. He tells you the customer has been declined as they have £200 on their Next Directory account, shakes his head a lot and mutters something about the multiples being fine and why does he f****ng bother
The point is its bloody hard to get a punter a mortgage already and all the stuff the FSA have said is happening already
Jonnie
PoTW - they are the lyrics of a song by the Kaiser Chiefs. I was going to put in the whole song, but thought it overkill.
'BH' - perhaps you would like to suggest some more tangible reasons why people should flock to your suggested company other than "they give their services away free"
There aint such a thing as a free lunch - and that's all you seem to be offering.
Strangest thing is - you are doing it on a site primarily read by AGENTS (not who I would expect to be your target audience); secondarily by HPCers who are all in RENTED properties; not Landlords themselves.
TWO barrels: BOTH missed the target by a county mile!
D'oh!
As the economy reaches an all time low, why not pay more and keep your service supplier in business?
as the economy hits its all time low,why should you be paying large property management fees.
contact Boatenghomes.co.uk they are offering 2 months free property management service. they are based in london old street.
Puzzled of Tunbridge Wells - I kind of guessed your post was laced with irony but I thought I would give a tentative chomp just in case ; ).
Anonymous Coward: "A wise man once wrote:
And if there's anybody left in here
Who that doesn't want to be out there
Is there a translation into English available?
Pod - you have been found guilty of an Irony Detection Failure.
It seems to me that some people really dont understand estate agents, we don't have much interest in house values, our businesses are built on sales volumes, it's vendors who are hung up on prices!
This is going to lead to farcical situations for the self-employed, who will be forced to pay themselves more salary than they actually need and pay tax they would otherwise not incur, all so the stupid rules on what constitutes "income" are met.
The same farce applies to dividends: as a company director I currently pay myself a minimal salary of £5000, because I have personal investment income and my wife's income is sufficient for our fairly frugal needs. If I need any spare money I instruct my company to issue dividends to me. If I want a mortgage under these mortgage companies' rules, I have to demonstrate sufficient salary and dividend income to cover the mortgage. To get a large mortgage all I have to do is instruct my company to pay me a large, say £200K dividend out of this year's profits, so suddenly it looks like I have a £205K annual income. Then all I need do is re-invest the £100K back into my company in the same tax year. How does this ludicrous exercise demonstrate affordability?
quite
and there lies the eurozone/world problem...all these loans on overpriced property are lying on the balance sheets of bank all over the world rendering them effectively insolvent.
thats why the problem is not solvable
What about the idea that you borrow money you can't afford to pay back - pay the interest on it for 25 years - and then sell the property at a massive profit to the generation coming behind who, in turn, do the same thing. ...........The next generation don't want to take part or cannot afford to take part in this silly game anymore. Rising unemployment and cost of living,wage freezes and high Uni fees will put paid to that + they want their 4/5 holidays a year and go down the pub/clubs. They are laughing at you.
Dave,
If house prices worry you so much in this way, don'tlet your kids buy one.
Get them to buy a brand new car, take it to bits, and sell each bit as a spare part. You will make huge profits
I am for your utopia, I would buy cheap houses too. But are you yourself delusional?
Do you feel the value of a house is in any way linked to the land it stands on and the cost to build it or replace it?
What is a brick worth? 40p, 50p, 60p?
How many are in your house?
What is your house worth broken up and sold as bits?
Sadly I think you are trying to get your head around money markets and banking strategy, investments, futures and alike.
You are not thiking in terms of Maslow. You don't seem to get it.
prices falling to affordable levels so our kids can grow the economy is an improvement in housing
anything else is financial terrorism
anyone who think we will return to the 2003-2007 madness is delusional
if prices fall transactions will double creating employment for diy,solicitors,removals etc etc and increasing stamp duty income
Mortgage tightening will happen until such time as ONE lender makes a drive for market share - then we will see an improvement. Shareholder still want profits
To the man with no name
Dave is right, although I understand he has an agenda.
I am an agent.
I have been stating for years that prices are too high.
On holiday in Spain in 2007, about to open my very own estate agency I thought "Maybe not..." then the Northern Rock went.
A very lucky escape if you ask me.
Prices are too high, fueled by irresponsible lending.
Unsustainably high - something has to change.
That is undisputed by anyone who is not an agent as far as I can tell (and me of course).
Prices have remained relatively static and the government appear to be playing instead with the VALUE of money, which has the same effect in the end.
But we need wage increases, which for very obvious reasons are unlikely for the next few years.
Dave,
Keep bailing that hay and mucking that shit out (if that is what you are good at), And wipe your boots. Your smells are stinking up this site.
House prices only rise, it has been proven beyond reasonable doubt at this point. I don’t think that anyone should be allowed to be an estate agent unless they believe in what they are selling, otherwise it is profoundly dishonest.
wow...thats a new concept...prove what you earn and that you can afford to pay it back
there is absolutly no way houseprices are going anywhere but down
its entirely possible for average prices to fall to 90-110k over then next 10-20 years
if price do fall back to this level then banks will start lending again
its called a normal market...btl rents will plunge when this happens as buyers buy up the liquidated portfolios of the reckless
Good, stop lending to people that can't afford it. Let prices drop on the back of this. Won't it be nice when people can afford to buy a house without lying and then spending the majority of their disposable income on servicing this lie.
Our quality of life will rise.
This potentially is a massive problem. Unless there is going to be some obligation on lenders to adopt what the FSA wants then it may all be for nought. But Grenville Turner is spot on in his comments as an already nervous and cherry picking lending industry is likely to become even more cautious.
The real issue here isn't so much new loans (though see also the later article about 2nd time buters etc) but the numbers of existing borrowers on interest only loans and who, like me are now in their 60's and have a time limit of age 75 to clear their loan.
If like me you are lucky and only have a tiddly mortgege and resources to clear it not such an issue. But if like many hundreds of thousands you don't then this is a massive problem that is going to come up in probably another 10 or so years time.
There was discussion on this on the Beeb this morning and with the normal age plus term = 75 maximum applied by most lenders it is going to be a real issue - especially with life policies not paying out what they once promised.
A wise man once wrote:
And if there's anybody left in here
Who that doesn't want to be out there
I predict a riot
I predict a riot
I predict a riot
I predict a riot
Then of course The Specials with Ghost Town...
One in 10? More like one in 2. According to the news this morning 50% of boom time mortgages were lent on a self cert basis.
We need lending to return to this level.
What is the matter with these people - they want people to only be lent money they can afford to pay back?
What about the idea that you borrow money you can't afford to pay back - pay the interest on it for 25 years - and then sell the property at a massive profit to the generation coming behind who, in turn, do the same thing.
Come on, a whole industry - heck, maybe even the whole economy, depends on that. Doesn't it?