UK FSA reviews mortgage market, incapable borrowers won’t be admitted

 The UK Financial Services Authority has plans to require mortgage lenders to check the income level of all borrowers for their ability to repay the loans. The regulators seeks to prevent financial companies from providing mortgage credit to "liar loans" blamed for helping to fuel bad debt problems at the heart of the credit crunch.

The FSA plans to impose affordability tests for all mortgages, but stopped short of imposing ratio limits that could have effectively banned loans for 100 percent or more of property prices.

Besides, in its review of the UK mortgage market published Monday the FSA banns products with "toxic combinations" of characteristics and arrears charges when a borrower is already repaying.

"The FSA needs to ensure that firms only lend to people who can afford to pay the money back," Jon Pain, managing director of supervision for the regulator, said. "The reforms that we have announced today will ensure that the mortgage market works better for consumers and that it is sustainable for firms."