The new FSA proposals on income and affordability came in for heavy criticism once again in this weekend’s financial press, with the Times reporting that lenders will be required to take into account leisure expenses including holidays, clothing and recreation when calculating affordability. Brokers expressed their concerns over the restrictive nature of the new guidelines, and particularly the impact this could have on groups such as First Time Buyers. Thousands of Interest-only borrowers will also suffer as a result of the new rules, and many lenders are already clamping down on this type of mortgage. Experts in the Telegraph suggested that these homeowners could face huge difficulties when rates rise and they cannot afford to switch to repayment. Some felt that nannying borrowers with a ‘one size fits all’ mortgage could have serious ramifications, and urged the FSA to reconsider. In the meantime there was news of increasing competition for business, with the Sunday Telegraph reporting that lenders are cutting rates in order to tempt borrowers to remortgage from low Standard Variable Rates. With the best deals only available to those with 40%-50% equity however, most homeowners are likely to stay where they are until the threat of a rate rise becomes a reality. Elsewhere the Independent on Sunday highlighted the importance of Critical Illness cover. The number of policyholders has fallen by 20% since 1999, yet there are around 298,000 new cases of cancer diagnosed every year. Individuals are advised to consider how they would cope with a potential loss of income as well as the cost of care that often results from long-term illness.
What the papers say- 13th and 14th November 2010