Housing and homelessness charity Shelter said that if the proposed new rules on mortgage underwriting were in place before, thousands of home repossessions could have been saved in recent years.
The Financial Services Authority has proposed stricter lending rules under its Mortgage Market Review programme, making lending and underwriting rules stricter to ensure less borrower default.
The new rules are expected to prohibit lending to borrowers who can’t keep up with their repayments and are likely to default. If the proposed rules were in force for the last five years, an estimated 17,000 repossessions could have been avoided, said Shelter.
“This research shows just how much the mortgage market has failed to protect people” said Chief Executive of Shelter, Campbell Robb.
“Reckless lending over the last few years, which saw some lenders giving out loans of more than 100 per cent of the value of the property and up to seven times people’s salaries, helped to fuel the rise in arrears and repossessions, not to mention an unsustainable house price bubble”, he added.
However, not everyone supports the FSA move and the Council of Mortgage Lenders (CML) have already criticized the FSA stating new rules make home mortgages approvals difficult for buyers.