MSE News: Hope for 'mortgage prisoners' amid lending clampdown

That will do the trick. Job done, housing market sorted. :whistle:

Here's the FSA announcement and here's a link to the Mortgage Market Review details link page. The key points summary from the full proposal page 11 is:

"Key proposals consulted on and position unchanged
Responsible lending

• Lender responsible for affordability checks.
• Income to be verified in all cases.
• As a minimum, committed and basic essential expenditure to be taken into account.
• Stress testing against future interest rate increases.
• Interest-only where credible repayment strategy.

Distribution

• All interactive sales (e.g. face to face and telephone) advised, except where the customer is a mortgage
• professional, or high net worth mortgage customer9, or business borrower10, where execution-only optional.
• Execution-only allowed for non-interactive sales (e.g. internet and postal).
• Requirement on intermediaries to assess affordability removed.
• Every seller required to hold a relevant mortgage qualification.
• Firms must act in the customer’s best interests.

Disclosure

• IDD replaced with a requirement for firms to disclose ‘key messages’ to the customer.
• The ‘trigger points’ for presentation of the KFI changed to reduce information overload for customers.

Arrears management

• The number of times fees for missed payments can be charged limited.
• The arrears charges and forbearance rules widened to cover all payment shortfalls.
• The costs which can and cannot be recovered through arrears charges clarified.
• Lenders prevented from removing concessionary rates because of payment problems.

Non-deposit taking mortgage lenders (non-banks)

• Risk-based capital requirement.
• Increase in quality of capital.
• High-level systems and controls to manage liquidity risk.
• Application on a solo-basis and not to firms in run-off.

Key proposals consulted on and position reconsidered
Responsible lending

• Transitional arrangements (see Chapter 3).
• Record-keeping requirements (see Q14 Annex 1).

Distribution

• Need for advice in relation to post-contract variations (see Chapter 2).
• High net worth mortgage customers and business lending
• Tailored regulatory approach recognising particular lending characteristics (see Chapter 4)."

For those who may want to port and overpay there's one key thing to consider. You will need advice to port if the amount of your mortgage increases. The cost of this advice is something that you must consider when deciding whether it makes sense to overpay. In many cases it will be a bad idea to overpay of you expect to port. Offset mortgages and those that let you withdraw overpayments are two workarounds. You can take out the overpaid money to get to the original mortgage level and also use the money to reduce the amount you need from a new mortgage. See pages 14 and 15, Table 2 for a summary of the rules on when advice is and isn't required.

There is very important protection for those who can't meet current lending criteria and this takes effect now. Lenders can choose to ignore the rules on interest only lending and affordability if they wish, whether it's for one of their own borrowers or a borrower from another lender. The amount borrowed must not increase, except by the amount of any fees and any money needed for essential repairs and maintenance work. See pages 18 and 19. A summary of the rules is in the table on pages 20 and 21.

"if the existing lender takes advantage of a ‘trapped’ borrower or treat them any less favourably than other customers with similar characteristics – for example, by offering less favourable interest rates or other terms – then this may be relied on as tending to" breach the lender's treating customers fairly obligation. Page A1:18. This takes effect immediately. If your lender seeks to increase your rates because you cannot remortgage, be sure to quote this rule to them and ask them to explain how their conduct complies with their TCF obligation.

For interest only mortgages there is no requirement for the lender doing a mid-term repayment strategy check to obtain independent documentary proof that a repayment strategy is still in place and remains credible. It's acceptable simply to ask the borrower. Page A1:26.

jamesd wrote: »

The following claim in the story is not quite correct:

"Borrowers can only take out an interest-only mortgage — where they only pay off their loan when it matures — if they can prove they are making separate plans to repay the loan."

There is no requirement for the plans to be separate. Acceptable plans can include making capital payments against the mortgage, including doing so from bonus money in future years, even where the exact amounts are not known.

The key requirements are that the repayment strategy is credible and affordable.

The old terminlogy of "repayment vehicle", which could have been taken to be something apart from the mortgage and/or some single method, has been abolished and replaced by the "repayment strategy" wording that is far more flexible.

Exactly the rodings do look better, however lets see how many allow such strategies i.e. making repayments independently during the course of the mortgage as a plan.

If it works than quite a few of us would go for it, I would for sure because the level of interest charged in an IO mortgage at the starting years is not calculated the way lenders do on repayment mortgages.

fooddestroyer wrote: »

Our combined net income is around 27k pa. We owe 140k on a mortgage, and our home is just worth about that.

Were currently "imprisoned" on intetest only SVR with NRAM.

Is there any options/hope??

Only option is to start tackling the debt. Overpay as much as you possibly can, take in a lodger, post a Statement of Affairs on the Debt Free Wannabee forums for help with a budget.