Countdown to new mortgage lending rules – FCA publishes simple guide to explain the changes to consumers

New rules from the Financial Conduct Authority (FCA), which come into force on 26 April 2014, will make sure a common sense approach is taken for every lending decision.

To ensure that people only get a mortgage they can afford, and to prevent a recurrence of the irresponsible lending practices of the past, every borrower will now have to prove that they can afford the repayments both now and in the future.  The FCA has produced a short guide that explains the changes. About half a million copies will be given out to prospective borrowers in branches of high street lenders, mortgage advisers, and estate agents.

Martin Wheatley, the FCA’s chief executive, said:

“In the past too many people got a mortgage by simply telling their lender they would have no problem repaying their debt, and that was that.  Getting a mortgage can be one of the biggest financial decisions people will ever make, so it needs careful consideration. Our new rules will hard-wire common sense into mortgage lending, and the guide we have created will help explain those changes to borrowers.”

The mortgage industry has been busy getting ready for the changes for about 18 months and many firms are using the new approach already, so some borrowers will not notice the difference.

The FCA has also updated its consumer information pages on its website.

Mortgage market statistics

  • the total market was worth about £1.3tn in 2013
  • of which,  the total outstanding mortgages to owner occupiers (i.e. excluding BTL): £1.06tn
  • total number of mortgages in existence: 9.6m
  • new loans in 2013: 0.9m (892,392)

Average size of new mortgage:

  • for first time buyers: £137,000
  • for remortgagers: £144,500

Notes for editors

  1. To view a copy of the FCA’s consumer guide to the new mortgage lending rules can be found online
  2. The new mortgage lending rules were confirmed in the Mortgage Market Review, finalised in October 2012
  3. On 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  4. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  5. Find out more information about the FCA.