The 'mortgage inquisition'
In a crack-down on mortgage lending, the financial industry will be rocked by a major shake-up this month with borrowers facing a tough inquisition into their lifestyles.
According to an article in the Daily Mail, mortgage applications look set to be delayed and borrowers may have to attend interviews of up to three hours when the new rules begin next week.
As cheap fixed-rate, short-term deals will be scrapped in a bid by the Financial Conduct Authority to prevent irresponsible lending, fears are growing that the measure will slow growth in the property market.
However, the reforms are aimed at averting the mistakes leading to the financial crisis of 2008 and could lead to borrowers seeing so called 'forensic style' probing into their personal and family finances.
Many borrowers will not be aware of the changes and may face delays with their mortgage application and could even miss out on their dream home as a result.
Chief Executive of the Financial Conduct Authority, Martin Wheatley admits that from Saturday, applicants will face 'invasive questions about their finances and lifestyle'. Borrowers will be quizzed about everything from their weekly food bill to their gym membership and childcare costs.
The changes which will affect borrowers across the financial spectrum from first time buyers to existing homeowners looking for a new product.
The new rules will virtually outlaw interest only mortgages and spells the death knell for short-term, low rate deals which entice buyers into a cheap fixed rate. Mr Wheatley admitted that the changes will lead to fewer 'teaser rates'.
He added "We have concerns about those short-term teaser rates that suck people into something. Lenders will all have to stress test all loans to check the borrower can still afford them if interest rates hit seven percent".
If you are buying or selling a property and need advice about costs, call our Smethwick conveyancers on 0845 603 0708 or email answers@nationalsolicitors.com.
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