Although Portugal is tightening up its mortgage regulations, the UK has now released new rules regarding self cert mortgages, pretty much making them now extinct.
The follow story from Yahoo UK News explains why.
“The Financial Services Authority unveiled new draft rules obliging banks to ensure all mortgage customers can afford their repayments, effectively outlawing self-certification loans and curbing reckless borrowing.
Under the rules, banks must obtain proof of all borrowers income before the loan is approved, the financial regulator said on Tuesday.Changes to mortgage regulation are a key plank of reforms which the FSA hope will avoid a repeat of the unbridled boom in household debt in the run-up to the credit crisis.”We need to build a strong new framework to protect mortgage customers and to ensure that the problems we have seen in the past do not happen again, particularly as the mortgage market recovers,” said Lesley Titcomb, the FSA director responsible for the mortgage market.The draft rules follows initial proposals which were published in October.The new regime would effectively ban self-certification mortgages, where no proof of income is required.Self-cert mortgages, dubbed “liar loans” after they were widely abused, accounted for almost half of all new mortgages between 2007 and the first quarter of 2010, the FSA said.But since the credit crisis, providers have either chosen or been forced to pull out of the specialist mortgage market and currently no such loans are on offer.Mortgage lending by British banks last year fell to the lowest net level since 2000 of 36.3 billion pound compared with almost 80 billion in 2006, according to the British Bankers Association.Punitive interest rates are being applied to those without hefty deposits, while low mortgage availability continues to impair a recovery in the housing market.
via FSA to ban self-cert mortgages – Yahoo! News UK.
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