The UK Financial Services Authority (FSA) has published proposals for reforms in the UK mortgage market which are relevant to our proposed responsible lending laws.

The review’s key features of the proposals, published in the mortgage market review discussion paper, are:

•Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay;
•Banning ‘self-cert’ mortgages through required verification of borrowers’ income;
•Banning the sale of products which contain certain ‘toxic combinations’ of characteristics that put borrowers at risk;
•Banning arrears charges when a borrower is already repaying and ensuring firms do not profit from people in arrears;
•Requiring all mortgage advisers to be personally accountable to the FSA;
•Calling for the FSA’s scope to cover buy-to-let and all lending secured on a home.

In particular the paper proposes making the lender ultimately responsible in every sale for verifying affordability. It also proposes that in each case a lender should assess the consumer’s ability to repay, i.e. calculate the free disposable income a consumer has to pay for the mortgage. Verification of income would be required for all mortgage applications.