Tough new rules governing the mortgage market in the UK have been unveiled by the Financial Services Authority (FSA). The regulator's Mortgage Market Review has been published and contains a number of proposals designed to ensure more responsible lending. The recommendations also include plans to provide protection for borrowers ‘trapped' with their current lender.
One of the most important proposals announced by the FSA is that the vast majority of Brits will have to seek advice from a professional mortgage adviser by 2014. We look at the new rules and how they will affect you.
The Daily Mail reports that the plans outlined in the Mortgage Market Review mean that "many will be forced to take financial advice to get a home loan". One of the biggest changes to the UK's mortgage market will see virtually all mortgages taken out in a bank or building society branch or by telephone require professional advice.
The Mail reports that the only borrowers who will not have to take advice are those who make ‘non-interactive' applications over the internet or by post. In addition, so-called ‘high-net-worth' individuals earning at least £300,000 or with £3million in assets will be able to opt out of receiving advice.
If you have done your own research, you will still be able to tell a bank or building society which mortgage you want and you can reject any advice or recommendations given. And, if you start an application online and you only using the telephone to obtain factual information, you will also not have to take advice.
While this move is designed to ensure that everyone receives advice from a qualified professional before they take out a mortgage, critics believe it will drive up the price of home loans. This is because banks and building societies will be required to ensure that all their advisers are qualified by 2014. Homebuyers and those remortgaging to borrow more may also find it takes longer to get a mortgage.
Martin Wheatley, managing director of the FSA, said: "These new rules will help create a more sustainable market that works well for everyone, whether they are a borrower or a lender. We recognise that many lenders are now using a far more sensible set of lending criteria than before, but it is important that these common sense principles are hard-wired into the system to protect borrowers. We want borrowers to feel confident that poor practices of the past, which led to hardship and anxiety, are not repeated."
Keith Osborne from whathouse.co.uk said: "On the whole, I welcome these proposals. Ensuring that you receive tailored mortgage advice from a qualified professional can only help to ensure that you get the right deal for you."