In its final Mortgage Market Review paper CP11/31, it has also proposed scrapping the term over which affordability could be assessed to a maximum of 25 years.
The regulator said both aims would be unnecessary “layers” of protection on top of the other affordability proposals.
“Building an extra ‘buffer’ into the affordability assessments for credit impaired consumers could have the effect of reducing their borrowing capacity, restricting their access to the market and forcing them to borrow from more expensive sources, such as the high-cost credit sector. This would simply have the effect of widening rather than addressing financial inequalities.
“We also share many respondents’ concerns about the impact our proposal to assess affordability on a maximum term of 25 years would have on younger borrowers. We have also had regard to the removal of compulsory retirement ages and later state pension ages.”
The FSA said that addressing poor underwriting standards will help ensure that mortgages being taken on by all borrowers are affordable.
“We do not want to restrict access to the mortgage market unnecessarily. We want to ensure that we continue to have a market in which everyone, no matter what their circumstances, can enjoy access to mortgage lending where they can afford it.”
