The UK Financial Services Authority (FSA) has proposed new rules recently aimed at protecting mortgage-holders whose payments have fallen into arrears. The aim is to ensure fair treatment, according to the regulator.
The new rules would make sure that repossession of a mortgage-holder’s property would only be an action of last resort by the lender. They would also prevent unfair charges being levied on the borrower, said the FSA.
The proposals have been outlined as part of an overall review by the watchdog of the entire UK mortgage market. In autumn last year, part one of the review called for the banning of self-certified mortgages, instead requiring anyone requiring a mortgage to clearly demonstrate that they can afford to keep up the repayments.
The latest suggestions would require firms not to add early repayment charges onto any charges arising from mortgage arrears, and interest would not be allowed to be added to those charges. Furthermore, if the borrower and lender have previously agreed a repayment plan to tackle the arrears, then there must be no monthly arrears charge. Also any payments made by borrowers who are in financial difficulties must go towards clearing those arrears first, ahead of arrears charges.
These proposals will hopefully clear up misunderstandings within the mortgage market, and this will be welcomed by borrowers, as a mortgage is the largest single financial product that most people will ever buy. There are over 2,000 such products on the market – as a result, borrowers want to make sure that they will be getting the best possible deals and the best possible treatment.
A truly wise potential mortgage-holder will maximise their chance of getting the best possible deal by employing the services of a financial advisor or mortgage broker. These professionals are adept at examining the market and matching the most appropriate mortgage to their clients’ personal needs and circumstances.
It has virtually become essential to utilise the services of a broker. Some 70 per cent of all potential mortgage-holders consult one before making a final purchase.
People who do not opt for a broker tend to organise their mortgage directly with the lender, via an intermediary generally known as a loan officer. This position still involves a significant degree of legal, ethical and professional responsibility. They are required to prevent any fraud from taking place and to ensure that both lender and borrower are completely aware of the terms and conditions of the deal.