Almost Half Of Loans Would Have Been Refused Under MMR
Following the effects of the credit crunch, recent recession and banking crisis in the UK, the Financial Services Authority (FSA) has proposed a new set of rules and regulations for the home owner loan and secured loan industry, in order to try and stop similar situations occurring in the future.
The proposed regulation changes have been outlined under the FSA’s Mortgage Market Review (MMR), which is currently under a consultation period with loan industry experts, before the rules are implemented.
Although these new proposals are designed to help protect people taking out a new home owner loan and stop the problem of irresponsible lending and borrowing on loans, almost half of the home owner loans currently being paid by borrowers would not have been accepted under the new plans.
The news comes from a report conducted by the Council of Mortgage Lenders (CML) who claim that somewhere in the region of 260,000 home owner loans which have already been offered to borrowers between 2005 and 2009 would have been restricted if the current proposals of the MMR had been in force at the time.
The CML has looked at a number of the proposals of the MMR and has calculated that more than half the home owner loan completed in the period would have been restricted.
The FSA has proposed that the maximum loan term should be 25 years, which the CML calculate would stop 13 per cent of people getting their loan on affordability calculations. If interest only loans were to be banned, this would mean that 37 per cent of borrowers would not have got their loan.
Although these measures are only proposals currently, the CML believe that whatever rule changes eventually do come into force will have a negative impact on the home owner loan market as a whole.
