Go to Top

Changes to mortgage laws will further protect borrowers

Banks must now adhere to a new set of rules when considering someone for a mortgage as the government tries to prevent borrowers over-stretching themselves as some have done in the past.

Under the new legislation, most borrowers will be given advice from a financial expert before they take out a mortgage. This will give consumers a better understanding of how much they can afford to borrow, taking into account the potential for future interest rate rises.

Another change is the prevention of self-certification mortgages. Lenders will be duty bound to investigate the earnings of their customer, and seek proof when necessary. This will give both parties a clear picture of how much the customer can afford to borrow.

Lenders will also be required to make plans for repayments on interest-only mortgages, rather than rely on house price rises to cover the cost of the loan.

The amendments came into force in April 2014. They are the result of a five-year collaboration between the Financial Conduct Authority (FCA), consumer groups and the industry leaders. The Mortgage Market Review (MMR) is intended to ensure that people will only be granted mortgage on terms that they are able to afford.

Martin Wheatley, chief executive of the FCA, said: “There has been huge effort both by the regulator and the industry to get to where we are today. Since the crisis, lenders have been taking a far more sensible approach to mortgage lending, and the MMR is designed to ensure that this common-sense approach continues.  We do not want to see mortgage lending return to the practices of the past where people were taking out mortgages they simply couldn’t afford.”

Please contact us if you would like more information about buying or selling a house.