Byline: GERRI PEEV POLITICAL CORRESPONDENT
TOUGH new rules for home loans could force buyers to declare how much they spend on alcohol and spell an end to self-certification mortgages.
Borrowers will see their spending habits come under closer scrutiny by lenders under detailed plans unveiled by the Financial Services Authority.
MiuMiu Handbags Replica Customers would have to spell out how much of their disposable income they devote to alcohol and tobacco, clothing and footwear, and household goods.
The watchdog set out its tough new proposals for risk-averse rules, which would also include an end to so-called "liar loans" or self-certification mortgages, where borrowers can access finance with very little proof of their earnings. Interest-only mortgages could also be reassessed on the basis of much tougher affordability criteria used for repayment mortgages.
While politicians and other regulators cautiously welcomed the move, there were also warnings that the new criteria could stop self-employed people whose loans are due to run out from qualifying for new deals.
The financial services industry now has until the end of January to comment on the proposals, which stopped short of limiting the amount of money individuals could borrow based on their earnings.
The FSA said it wanted to bring buy-to-let lending and second-charge mortgages, which enable people to take out loans secured on their property, under its control. UK homeowners now owe GBP 1.23trillion.
Panerai FakeThe watchdog admitted the measures were part of a shift to a "more intrusive and interventionist" style of regulation.
And the FSA's chief executive, Hector Sants, admitted some people who were able to maintain mortgages under the less regulated old system would now be cut off from accessing home loans.
"We just have to recognise that both firms and consumers don't always make the best decisions," he said. "They don't always act in their best interests or indeed in the collective interest of society, so we need a new approach to regulation, which is what the FSA is carrying through."
Under the proposals, lenders would be forced to determine a consumer's ability to repay their loan, taking into account their monthly disposable income.
But the regulator stopped short of putting forward an outright ban on mortgages with high loan-to-value ratios or ones which lent high multiples of borrowers' income.
embroidered patches It said this would be a "blunt approach" for tackling the problems in the mortgage market, while there was no evidence that borrowers taking on mortgages with only one of these characteristics suffered higher levels of arrears. However, the FSA warned that it had not ruled out imposing caps if its initial proposals did not have sufficient effect on the market.
Gordon Brown backed the FSA's proposals, saying: "Lenders should have to carry out proper checks on incomes before agreeing home loans."
But British Bankers' Association chief executive Angela Knight said: "It is important to get the balance right, so people who deserve a mortgage because their income warrants it aren't ruled out by rule changes."
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