Oct. 5 (Bloomberg) -- U.K. banks would have rejected 3.8 million home-loan applications in the past five years had the Financial Services Authority’s plans to tighten lending been in force, the Council of Mortgage Lenders said.The UK is a subprime country. Shall I say more?
About 51 percent of customers applying for mortgages from 2005 to 2009 would have failed the FSA’s tests on whether they could afford the loans, the lobby group said in a statement today. The figures contradict the FSA’s own study, which found 17 percent of borrowers would have been rejected, the CML said.
Britain’s financial watchdog published a report in July proposing stricter tests for borrowers to ensure they have sufficient money to repay the loans if interest rates rise and house prices decline. The regulator’s plans would restrict interest-only mortgages and ban self-certification mortgages, according to lenders.
“The current proposals sacrifice far too many borrowers,” the London-based CML said in the statement. “Our concern is to make sure that the rules which are finally implemented are clear in their intended impact, practical in their implementation, and fair in their overall effect.”
The Building Societies Association, which represents the U.K.’s 49 customer-owned lenders, said last week the FSA’s proposals risk pushing up borrowing costs and limiting choice for consumers.
“Our proposals are designed to address the major failures that have occurred in the mortgage market,” the FSA said in a statement. “For now, borrowers are also benefiting from historically low interest rates and house price inflation, which cannot go on forever.”