The FSA’s Mortgage Market Review includes, for the first time, provision for regulating and banning specific product charges, a requirement for lenders to assess affordability for all mortgages and a crackdown on rogue advisers.

* Launched in October 2009, the review examines how the FSA’s supervision can deal with firms, like Northern Rock, that adopt high-risk strategies that threaten the wider market.

* A regulatory landscape where the FSA is prepared to intervene where business models and strategies create undue risks for firms, consumers and the financial system generally, is envisaged.

* Ways to reducing the number of unaffordable mortgages and the unsustainable growth of riskier products by banning self-certification and requiring income verification for all mortgages are considered.

* Lenders are made ultimately responsible for affordability assessments. An assessment of a consumer’s free disposable income will become a fundamental element in the process of providing a mortgage under the new regime.

* Arrears rules are set to be strengthened with the FSA banning firms from imposing arrears charges on borrowers who have an agreed arrangement in place.

* Standards of “fitness and propriety” among individual advisers are set. The FSA pledges to crack down on rogue individuals and mortgage fraud by expanding the FSA’s approved person regime to cover several thousand mortgage intermediaries.

* Banning mortgage loans to borrowers who have certain combinations of risky characteristics is considered. The FSA has not ruled out loan-to-income or loan-to-value caps in the future. The regulator has said it is open to a debate on restrictions on equity withdrawal.

To read more about the Mortgage Market Review click here.

• Latest Regulation Papers
• News and Analysis