It looks as if the Financial Services Authority (FSA) is hoping to shut the stable door after the horse has bolted with plans to cap the amount that mortgage lenders can offer to borrowers.
The new rules are to be announced this week, with 100% mortgages expected to be banned, along with guidelines on the maximum borrowers are allowed to be lent based on a multiple of their salaries.
Although the details of the rules are as yet unknown, the Telegraph has tried its best to answer a few of the questions that borrowers will no doubt be asking.
One of the interesting aspects is whether these rules could lead to further falls in house prices:
If borrowers are unable to obtain mortgages greater than three times their salary, property prices could potentially fall considerably further than the 10 per cent or so forecast for this year. Borrowers simply won’t be able to obtain a big-enough mortgage to get the property they want, particularly as they will also need to put down a sizeable deposit as lenders remain unwilling to lend at higher loan-to-value. Sellers will have to drop prices further if they are to achieve a sale.
There are some more interesting thoughts on this point over at Economonkey. It doesn’t make for very happy reading.
photo credit: Rain Rannu