The Financial Conduct Authority (FCA) has suggested that the current strict rules on mortgage lending could be eased to help home buyers.
The move comes after Prime Minister Sir Keir Starmer wrote to the FCA asking it for ideas on how to reduce some regulations to increase home building and boost the economy.
Strict regulations on mortgage lending and how much a buyer can borrow were put in place after the 2008 financial crisis. It meant lenders could not simply ask whether borrowers could afford repayments at current interest rates, but whether they would still be able to cope if rates were to increase.
These tighter rules have worked well in preventing people getting into debt, but some critics say they have also made it harder for people to get on the housing ladder even though they are perfectly capable of repaying a mortgage.
Indeed, some people are forced to rent and find themselves paying far more each month than they would if they had bought a property with a mortgage.
The FCA has responded to the Prime Minister saying it will investigate ways to simplify the rules.
This is likely to involve a shift in the balance between protecting borrowers, while providing greater access to home loans for those that can afford the repayments.
The FCA says the number of borrowers missing repayments or having homes repossessed is currently low, potentially giving some scope to ease restrictions.
In response to Mr Starmer, it says: “We will begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults.”
We shall keep clients informed of developments.
Please contact us if you would like more information about the legal aspects of buying or selling a home.
