Financial watchdog the FSA (Financial Services Authority) have called for the introduction of stricter affordability tests, so their members can recognise potential debt management issues and prevent future debt problems from developing.
Any applicants looking to get a home loan may have to divulge more about their spending habits, including how much is spent on smoking, going out and even theatre trips.
The discussion paper introduced by the FSA, is seeking to ensure that lenders are more responsible with their granting of mortgages, in a bid to ensure the number of defaults doesn’t reach the proportion before the credit crunch took hold.
Experts have predicted that the proposed changes could bring about a return to more long-winded checks on a borrowers suitability for a loan, akin to those frequently experienced in the seventies.
Robert Sinclair, director of the Association of Mortgage Intermediaries, a trade body representing brokers, said: “We are concerned with proposals to introduce stringent criteria for lending that may significantly increase the cost of borrowing for ordinary, responsible consumers.”
Ivan Cooper, chairman at leading debt advice specialists Chiltern, said: “These proposals could mean that many homeowners are tied-in to expensive mortgage deals.
“Some, like the self-employed or those who work on a more contractual basis, may find it virtually impossible to get a new home loan.
“This could drastically impact household budgets, as it will reduce their spending power and mean that some may face mounting debt problems as much of their income is swallowed by expensive home loans.”
Jon Pain, managing director of supervision for the FSA, said: “The reforms will ensure that the mortgage market works better for consumers and that it is sustainable for firms.”
