Analysts, property experts and financial advisers have all been giving their opinion on new mortgage regulations – with a consensus being some way off.
The UK’s Financial Conduct Authority rolled out changes over the weekend which meant that mortgage applicants needed to undergo much more thorough testing before a decision is made on whether or not to offer the loan. The general thrust of this is to determine not only whether buyers can afford the repayments now, but whether or not they could continue to afford them if interest rates were to rise.
Now, a number of experts have put forward their takes on the issue, with hugely varying results.
Writing for theguardian.com, MoneyWeek editor in chief, Merryn Somerset, argued that the new regulations were something banks should have been doing all along. She claimed that, once the dust has settled on the new scheme, people will be amazed that banks were able to offer huge loans in the past without this information at hand.
Turning her attention to the most recent financial crash, Somerset argued that blind lending leads only to financial catastrophe.
Despite these claims, deputy personal finance editor at telegraph.co.uk, Dan Hyde, countered that new regulations would only serve to create a brand new generation of ‘mortgage prisoners’. He said that three-hour interviews at the bank were too much for many people with busy lives and questions regarding whether or not a couple want to have children is unnecessarily intrusive.
Concluding, Hyde rubbished claims that more regulation would prevent a global financial crash from taking hold again.
“The theory, developed by the City regulator, is that such tests will prevent a repeat of the 2008 financial crisis,” he noted. “In practice, though, several negative side-effects call into question whether this ploy to wrap cotton wool around Britain’s fragile financial system is a mistake.”