New rules proposed by the Financial Services Authority in the UK, known as the Mortgage Market Review, are likely to be enforced by next summer, and could create misery for millions of homeowners. According to the Financial Services Consumer Panel, many existing homeowners will face difficulty remortgaging when their current deal comes to an end.
Many of these homeowners took out there home loans at a time when the property market was booming, and have interest only mortgages where the monthly payments are lower. Many of these homeowners have little or no equity in their property. A significant proportion of these loans are likely to be underwater, and the worry is these homeowners would face difficulty qualifying for a new mortgage deal. Now many of these mortgage deals are coming to an end, and the new rules being proposed by the FSA could exacerbate the current mortgage drought.
The Financial Services Consumer Panel is asking the FSA to make the transition period easier for those facing difficulty remortgaging. Homeowners falling into this category are likely to become even more vulnerable due to a number of lenders increasing their standard variable rate (SVR) in the last few weeks. The Panel thinks the FSA should introduce a new role specifically protecting these consumers.
The Consumer Panel thinks that unless the FSA has solid empirical evidence that consumers won't be harmed by the prompt implementation of these new lending requirements, then they shouldn't be applied until the real estate market is shown to be in recovery.
The Panel is concerned about these new proposals even they acknowledge they are necessary, especially given the chaos which resulted in the mortgage market due to lax regulation in the past. The FSA feels the current transitional arrangements will be sufficient to allow lenders to give out new mortgages to those affected, and has pointed out these new rules won't be introduced until the housing market is in better shape.