Home borrowers to face questions on Christmas spending

Home buyers will have to provide details of their income and spending before being granted a mortgage
12 April 2012

Borrowers may have to provide details of how much they spend on Christmas presents or their summer holidays to get a mortgage under a tough new clampdown unveiled today.

Proposals from the Financial Services Authority will require lenders to interrogate home buyers about their personal expenditure in unprecedented detail before agreeing loans.

The watchdog's wide-ranging review of Britain's £1.3 trillion mortgage industry is in response to concerns about irresponsible lending in the boom years when many were given home loans they could not afford to pay.

In future the legal onus will be on lenders to be sure home buyers do not take on monthly payments they will struggle to meet due to other commitments.

Lenders already often seek a rundown of monthly outgoings but the tougher regime could mean an "audit" of annual commitments such as birthdays and car expenditure.

Andrew Hagger of personal finance website Moneynet.co.uk said: "All these costs combined can account for a significant slice of a potential borrower's total expenditure."

The FSA also proposed a ban on self-certification mortgages — so-called "liars' loans" — for which borrowers do not have to provide detailed evidence of earnings.

But it faces a backlash from thousands of the two million self-employed workers who rely on self-certification to get on the property ladder.

They fear they will now be locked out of the market, particularly if they do not have three years of fully audited accounts Stephen Alambritis, of the Federation of Small Businesses, said they could now face "horrendous" obstacles to obtaining a mortgage if the proposals go ahead in their current form.

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