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Changes to UK Mortgage Lending Guidelines

When discussing the state of the UK economy the media tend to focus on the short term implications. With the UK property market struggling to get back on its feet, anything that slows its recovery is often seen as a negative thing. This has meant that the recent effort to reform mortgage lending rules has been met with a lot of opposition and criticism.

By taking a much wider perspective it’s clear that the financial crisis and banking collapse which started the economic downturn is largely down to the irresponsible lending of banks and other financial institutions. By capitalising on the financial boom of the early 90’s, banks were able to record record profits. Unfortunately, this wasn’t sustainable and their poor lending decisions led to everyone facing very difficult financial times.

The chief City regulator, the Financial Services Authority (FSA) is acting now to make sure this type of thing never happens again. They believe that the scrutiny of someone’s ability to repay the money that they are being leant needs to be greatly improved. They believe that this will protect both the individual and the wider economy from facing further economic challenges and hardship.

The work that’s currently being done by the FSA has caused fear amongst potential property owners that they will be turned down for mortgages. This, coupled with the efforts being made by the UK government to stimulate growth in the UK property market, means that the work the FSA are doing is being met with a lot of scepticism. However, the FSA have urged people not to worry too much about what they are doing. They have pointed out that mortgage restrictions have been much tighter since 2008 anyway and that, in actual fact, these new regulations will only affect approximately 2.5% of those wishing to borrow money.

The fact that it will only affect a very small percentage of the population, will help avoid people getting into financial difficulty and help protect the national economy for years to come, we can only see the FSA’s efforts as a positive thing.