Jul
11The Financial Services Authority (FSA) has today issued a statement proposing that future mortgage arrangements should only be entered into if the lender is convinced that the borrower will be able to afford the agreement in the long-term. Making lenders responsible for ensuring that borrowers are in a position to afford mortgage payments going forward may sound obvious, but is something of a significant shift from the current setup.
Historically, while various checks and tests will be carried out before any mortgage arrangement is a place ultimately it is down to the borrower to ensure they are able to pay off their mortgages in a timely manner.
One issue which seems to be catching the eye of the FSA is the increase in interest only mortgages which have proved to be something of a major difficulty in the past. A number of customers who have taken out this particular type of mortgage have also taken out endowments which they had hoped would increase in value over the years and enable them to pay off their initial capital at the end of the mortgage term. However, for many interest only mortgage customers this has not been possible and a number were left short by thousands of pounds and forced to make alternative arrangements.
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