Tough new rules to hit housebuyers

House keysNew rules on mortgage lending that could prove problematic for those trying to get on the property ladder are due to be announced on Thursday.

The Financial Services Authority (FSA) is expected to say that lenders will be unable to agree a mortgage unless a homeowner can repay it before they are 70 or 75, the Daily Mail said.

This could cause difficulties for people in their 50s trying to get a mortgage, as most loan terms are for 25 years.

David Hollingsworth, from mortgage advisers London & Country, told the newspaper that lenders would demand mortgages are paid off by the time people were 70 or 75, and said that banks and building societies were already starting to tighten their lending criteria.

New regulations will also include a crackdown on interest-only mortgages, a favourite of first-time buyers as they only require payment of interest on the loan, not the actual loan sum itself.

But lenders will now have to demand that homeowners with interest-only mortgages build separate savings to pay off the loan itself, the Council of Mortgage Lenders said. Checks will also be made during the term of the mortgage to make sure the savings fund is still in place.

The raft of restrictions are set to be placed on mortgage loans due to a clampdown by the FSA on irresponsible lending, to make sure borrowers can only take out deals they can afford.

The FSA's Mortgage Market Review (MMR) proposals will place new rules around mortgage advice and income will have to be verified in every application, with lenders placing greater emphasis on other regular outgoings.

A Council of Mortgage Lenders spokesman told the Mail: "The FSA has already trailed the broad outline of the forthcoming regulatory changes for a long time, and the mortgage market has to a great extent already absorbed and planned for them. On the one hand, this means that consumers are unlikely to suffer significant additional impacts as a result of the changes. On the other hand, it also means that the relatively high hurdles for customers in getting a mortgage are likely to remain a permanent feature of the mortgage market."

The FSA does not plan to implement most of the proposals before the summer of 2013, and an announcement on the changes is expected tomorrow.

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