FSA proposes major reform for buy-to-let lending

The Financial Services Authority (FSA) yesterday announced proposals for increased regulation of the buy-to-let mortgage market.

Plans under the Mortgage Market Review include tighter scrutiny of buy-to-let lenders by the FSA who currently only oversee the residential mortgage market.

The city watchdog has called for a ban on self-certification mortgages and wants to impose affordability tests on lenders, making them responsible for properly assessing borrowers' ability to pay back loans.

Jon Pain, FSA managing director of supervision, said: "The mortgage market has seen extraordinary upheaval over the last 18 months and whilst it has worked well for the vast majority of borrowers, some have suffered great financial distress."

He added: "The FSA needs to ensure that firms only lend to people who can afford to pay the money back. The reforms that we have announced today will ensure that the mortgage market works better for consumers and that it is sustainable for firms."

The review is now up for discussion until January 30th 2010, giving consumer groups and industry bodies a chance to air their views.

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