A plan to put a cap on mortgage lending is being put forward by the Financial Services Authority.
The plan stipulates that mortgage lenders should not lend amounts over three times the annual salaries of mortgage applicants. Under the new scheme there would be a potential ban on 100 per cent mortgages too. Both of these measures would severely hamper first-time buyers from getting a foot into the property market
Managing director of Moneyextra.com Richard Mason said that first-time buyers constitute a vital segment of the housing market. They are necessary to keep the market active and afloat.
Mr Mason stressed the overriding need to look after the interests of first-time property buyers. He said: ?Our recent research on the UK property market revealed that over 5.2 million people are looking to buy their first property in the next six months, compared to the 675,000 homeowners who are looking to downsize.”
He also said that buyers would need to put down a deposit of at least 20 per cent in the current market as required by most currently available mortgage products.
Ray Boulger, a spokesman for John Charcol, said of the plan: ?Going back to old fashioned income multiples would be a seriously retrograde step and particularly so with a multiple as low as three.?
He added that such limits placed on first-time mortgage applicants would be unfair on those who elect to spend more on their home than perceived luxuries such as ?cigarettes, alcohol, eating out, clubbing and holidays?. Another important repercussion of the proposed plan, the spokesman added, would be the difficulties placed on existing mortgage customers who might be prevented from remortgaging or moving to another property.
