New mortgage market rules take effect

The U. K.'s new mortgage market rules that aims to prevent a repeat of the 2008 real estate crisis have finally taken effect.

The new rules, which were finalized in October 2012, will restrict self-certified and interest-only type of mortgage schemes and prevent lenders from relying on soaring prices of property to balance the risk that a borrower might not be able to repay his/her loan in the future.

From now, borrowers will have to prove their ability to make mortgage payments even in case of rise in interest rates.

Martin Wheatley, CEO of Financial Conduct Authority, stressed that borrowers should feel confident that practices that led to hardships and anxieties for borrowers in the past would not be repeated.

Speaking about the new rules, Mr. Wheatley said, "We do not want to see mortgage lending return to the practices of the past where people were taking out mortgages they simply couldn't afford."

The number of loan products available in the UK market with a 5 per cent deposit has increased by three-folds to 132 since October last year, when the government extended its Help-to-Buy program that helps buyers with down payments on new homes.