Commenting Paul Broadhead, head of mortgage policy at the Building Societies Association, said: "These new mortgage rules will apply from April 2014 and no one can argue with the objective that lenders lend what consumers can afford to repay.
“It is common sense that a mortgage should be repayable from income, rather than rely on increasing property prices and this is the approach that building societies and other mutual lenders already take. Checking that a mortgage can still be repaid if mortgage rates rise also makes sense and lenders will have to take a five year view on this.
"Contrary to some reports the over 50s won't be “banned” from getting a mortgage under the new rules. Consumers will however be faced with more detailed questions and the need to demonstrate that they can afford a loan - the application process may take rather longer than it does today too.
“There has been a lot of speculation about whether the FSA wants to see interest only remain as an option for new mortgages. It is good to have had confirmation now that they accept that it can be the right product for some people. The key will be that the borrower has a sensible repayment strategy in place - relying on rising property prices and sale at the end of the mortgage term won't wash."
