Cancelled Mortgage Protection Cover And Costly Mortgages
Lord Turner, the chairman of the Financial Services Authority (FSA), spoke yesterday about strong plans to ban self-certification mortgages. In doing so, he revealed research showing that 46% of households have no money left after paying their mortgages and living costs and have no Mortgage Protection Cover to help them out. The plans set out a structure where banks will have to conduct an ‘affordability test’ on every mortgage they sell.
Self-certification mortgages are those that are usually taken out by self-employed people who have difficulty proving their income. The reason why they are being banned is because they have been linked to high level of arrears. During the address, Lord Turner also said that there are too many ‘Interest only’ mortgages currently held, at 30% of all mortgages.
In advising the banks, Turner said that income verification should be required in every case and that the new proposals should help cut the high levels of fraud in the mortgage market. There will be no ban on high loan-to-value mortgages, or controversial 100% mortgages.
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