On 26 April new rules from the Financial Conduct Authority (FCA) will change the way people in the UK get a mortgage to buy a house. It is designed to adopt a more common sense approach for every lending decision.
To ensure that people only get a mortgage they can afford, and to prevent a recurrence of the irresponsible lending practices of the past, every borrower will now have to prove that they can afford the repayments both now and in the future.
The FCA’ short guide is available online from its website and half a million copies will be given out to prospective borrowers in branches of high street lenders, mortgage advisers, and estate agents.
‘In the past too many people got a mortgage by simply telling their lender they would have no problem repaying their debt, and that was that. Getting a mortgage can be one of the biggest financial decisions people will ever make, so it needs careful consideration,’ said Martin Wheatley, the FCA’s chief executive.
‘Our new rules will hard wire common sense into mortgage lending, and the guide we have created will help explain those changes to borrowers,’ he added.
The mortgage industry has been busy getting ready for the changes for about 18 months and many firms are using the new approach already, so some borrowers will not notice the difference.
The total mortgage market in the UK was worth about £1.3 trillion in 2013 of which, the total outstanding mortgages to owner occupiers, that is excluding by to let, was £1.06 billion.
Total number of mortgages in existence is currently 9.6 million and new loans in 2013 amounted to 892,392.
The average size of a new mortgage for a first time buyer is £137,000 and for remortgagers it is £144,500.
