Borrowers looking for a mortgage might be shocked by what they find. The UK financial watchdog just announced a new crackdown on lending. Certainly, no one wants a situation of irresponsible lending to arise. To this end, the Financial Services Authority is creating stricter restrictions on the approval of home loans.
The new proposal forces those looking for a mortgage to provide much more detailed evidence of their household spending – including almost everything from their gas usage to their childcare costs.
The FSA has pointed out that more than half of current borrowers in the UK over 50 have mortgages that continue well beyond the age of 65.
The Mortgage Market Review said,
“The degree of scrutiny that the lender applies may vary according to the period of time remaining to state pension age. The closer it is, the more robust the evidence of the level of income in retirement should be.”
The Council of Mortgage Lenders has actually estimated that 45,000 homes may be repossessed next year – and that is up 20% from an estimated 37,000 from 2011. The FSA has further warned that, while low interest rates have helped in some cases for borrowers, they are actually quite dangerous because some homeowners can’t meet their repayments when the rates go up.
The FSA’s plans will be published next summer and implemented no sooner than the summer of 2013.