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Homebuyers could face `affordability tests` to get a mortgage

26/10/2009

According to the Financial Services Authority (FSA), homebuyers could face `affordability tests` before their application for a mortgage is accepted, the Times reports.

The new tests would require lenders to take a detailed look into homebuyers` personal spending (on clothes, childcare, alcohol, etc.) to assess their ability to repay their mortgage debt.

New measures also include a plan to ban self-certified mortgages, and to stop lenders from `exploiting consumers` who have fallen into arrears on their payments towards their mortgage debt.

In its review of the mortgage market, the FSA said: "There is clearly a responsibility on all lenders to extend credit only where a consumer can afford it and, in our view, a robust assessment of both income and expenditure is key to ensuring affordable mortgages.

"We propose to require all lenders to assess the level of a consumer`s expenditure in determining the affordability of a mortgage product, to ensure that lending decisions are based on a consumer`s free disposable income."

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US: new law provides debt-free date 02/02/2010 - Thanks to a new law, credit card providers in the More debt taken on than repaid in December 01/02/2010 - According to figures from the Bank of England (BoE), in Savings rise as consumers pay down debt 29/01/2010 - According to a survey of 13,000 savers by ING Direct, Household debt `could trigger another downturn` 28/01/2010 - The high level of debt carried by the British public