The rules, set to be implemented six-months later than expected on 26 April 2014, enshrine directives including lender affordability checks, income verification and stress testing against future interest-rate rises.

From 2014, lenders must verify income and demonstrate affordability checks have been completed on every borrower’s net income and expenditure.

Lenders will also be expected to stress test all mortgage interest rates against market expectations, in case of rate rises. And on interest-only, lenders will be expected to assess all new borrowers on a capital and interest-basis.

However, the rules state a borrower does not have to be assessed on a capital and repayment basis for an interest-only loan if applying for the same loan amount. However, lenders must assess affordability on a capital and repayment basis, if the applicant wants a further advance.

One substantive change is that lenders have to keep borrowers records for the life of the mortgage, not just three years as originally proposed.

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The FSA has simplified its affordability requirements  and checks will only be required if there is additional borrowing or a material impact on affordability, excluding contract variations or replacement contracts.

The FSA has also simplified its transitional arrangements by allowing lenders to make their own assessment about allowing exceptions to the affordability and interest-only rules.

High-net worth (HNW) borrowers, defined as having a single income of £300,000 a year or £3m in net assets, are also exempt from many of the affordability assessments required for mainstream borrowers.