The proposals follow earlier consultations and feedback statements through 2009-2010, and cover key areas
- Advised versus execution-only: an advised sale will be defined as any sale that stems from any sort of consumer-seller interaction, in which case the seller will have to assess suitability. Execution-only will only be possible in limited situations, such as if there is no interaction, if the customer is high net worth, or in some situations if the customer does not wish to take the advice. The non-advised regime will be effectively scrapped.
- Vulnerable customers: the rules will be stricter for vulnerable applicants to protect them from unknowingly making unsustainable commitments. These will have to receive advice, and (in sale & rent-back situations) will have to take it.
- Affordability assessment: self-certification mortgages will be banned and income will have to be verified in every mortgage application. In assessing affordability, lenders will have to stress-test interest rate changes and consider major outgoings such as heating and council tax.
- Interest-only mortgages: would still be allowed but lenders will have to be stricter about assessing repayment vehicles. Relying on rising property values will be severely restricted.
- There will be a transition process and existing borrowers will be unaffected, and there will be flexibility to provide new mortgages to existing customers even if they fail the new affordability requirements.