Mortgage Affordability Test Planned

Borrowers will face affordability checks before they are accepted for a mortgage under plans announced by the City watchdog. 

The move is aimed at making lenders get "back to the basics" of lending responsibly, the Financial Services Authority (FSA) said. 

Customers will have to provide proof of income from an independent source, effectively putting an end to self-certification and fast-track mortgages. 

Lenders will be left to determine the criteria of the affordability test, with the FSA only outlining possible options such as "line-by-line" assessments of applicants' outgoings, statistical data or in-house expenditure models. 

However, the check must be based on a 25-year repayment mortgage, not interest-only, and account for potential interest rate increases. 

Lesley Titcomb, FSA director responsible for the mortgage market, said: "There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back."