Lynda Blackwell, head of mortgages at the FCA, told an audience at a conference held by the Association of Short Term Lenders (ASTL), that the industry must be diligent in its assessment of borrower’s affordability history.
In July, Peter Williams, head of trade body the Intermediary Mortgage Lenders Association (IMLA), told Mortgage Solutions there was likely to be a resurgence of subprime lending in the UK with a subsequent securitisation of these mortgages.
Blackwell said: “We are seeing an increase in subprime lending in the market and a growing tolerance of very poor credit history and lending to the self-employed with accounts of one year or less. The uncertainty for us is around just how far is this credit risk taking likely to go, we don’t want to see a race to the bottom that we’ve seen in the past. This is something that we are continuing to monitor closely.”
She added: “The important thing, and it’s a pretty simple thing, is to remember and undertake proper affordability checks, ensuring that loans are only granted where the borrower can afford to repay out of income, or in the case of bridging that the borrower has a credible exit strategy.”