People who want to raise a second mortgage on their property will find it much harder, after the Financial Conduct Authority announced it plans to regulate the loans from March 2016.
Second mortgages are currently treated as consumer credit and, for example, are not routinely included in data about mortgage arrears.
However, the FCA said that arrears rates for second charge mortgages were “significantly higher” than for first charge mortgages.
Under the new regime, borrowers would have their affordability checked, and would have to prove they could afford to repay both sets of mortgages.
The clampdown on second mortgage lending would mean that 10–17% of consumers currently granted such a loan would not be allowed one, while 22–30% would be able able to borrow less than before.
The FCA, which is currently consulting on is plans, says: “As a consequence of our proposals, using the subdued period between 2009 and 2011 as our basis, our modelling would indicate a reduction in lending volumes of around 20%.
“This would imply a reduction in the volume of lending in the second charge market of around £100m.”
Comments (1)
Took long enough. I see so many repossessions caused by second mortgages which should never have been deregulated by the Blair government. Bring back second mortgages for home improvements only, it worked before but allowing the money to be used for a booze up in Spain etc was asking for trouble.