BSA: Borrowers must have sensible repayment strategy – relying on rising property prices won’t wash
Paul Broadhead, Head of Mortgage Policy at the Building Societies Association said:
"These new mortgage rules will apply from April 2014 and no one can argue with the objective that lenders lend what consumers can afford to repay. It is common sense that a mortgage should be repayable from income, rather than rely on increasing property prices and this is the approach that building societies and other mutual lenders already take. Checking that a mortgage can still be repaid if mortgage rates rise also makes sense and lenders will have to take a five year view on this.
"Contrary to some reports the over 50's won't be 'banned' from getting a mortgage under the new rules. Consumers will however be faced with more detailed questions and the need to demonstrate that they can afford a loan – the application process may take rather longer than it does today too.
"There has been a lot of speculation about whether the FSA wants to see interest only remain as an option for new mortgages. It is good to have had confirmation now that they accept that it can be the right product for some people. The key will be that the borrower has a sensible repayment strategy in place – relying on rising property prices and sale at the end of the mortgage term won't wash."
Contact:
Hilary McVitty – hilary.mcvitty@bsa.org.uk / 020 7520 5926
Victoria Bamber – victoria.bamber@bsa.org.uk / 020 7520 5927
Notes for Editors
1. The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 47 UK building societies. Mutual lenders and deposit takers have total assets of over £375 billion and, together with their subsidiaries, hold residential mortgages of £245 billion, 20% of the total outstanding in the UK. They hold more than £250 billion of retail deposits, accounting for 22% of all such deposits in the UK. Mutual deposit takers account for 31% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.
2. Photographs of Paul Broadhead are available from the BSA press office, or from the Association's website at www.bsa.org.uk or Headlinemoney www.headlinemoney.co.uk
3. Follow the BSA on Twitter @BSABuildingSocs
Katie Wise
Policy and External Affairs Officer
Building Societies Association
6th Floor, York House
23 Kingsway
London
WC2B 6UJ
Tel: 020 7520 5904
Email: katie.wise@bsa.org.uk
Web: www.bsa.org.uk
Twitter: @BSABuildingSocs
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