It has been a long time coming but finally the Financial Services Authority (FSA) has published this week their lending rules that in effect make it difficult for anyone to get a loan without proving they can afford to pay it back.  That means proving that the borrower has the ability to pay back a loan and can afford the loan for which they are applying.  For many this makes sense, but for years borrowers took out loans that offered them mortgages above the value of their properties, interest only loans without the ability to stay above the loan should property values decline, and many took out loans without ever proving they could afford them.

Now the FSA means to make lenders more responsible for the loans they approve.  Their new lending rules will be put into effect in April 2014.  The changes will not likely have much of an impact in the current lending market as many lenders have already adapted and put into place tougher criteria for lending as they expected the rulings to put an end to self-certified loans and other risky lending practices.

There are critics and many are declaring that the new policies will keep generations in hardship with little opportunity to start a new business or buy a starter home. 

While others believe that the rulings are important and necessary and it puts borrowing into a state of reality.  Those for the FSA rulings believe it saves borrowers from themselves and keeps them out of debt they cannot afford to pay back.

Peter Vicary-Smith, chief executive of Which? said, “Proposals for banks to conduct an affordability test will hopefully prevent a return to the irresponsible lending of the past.

“It's disgraceful that banks encouraged so many people to borrow more than they could afford without proper checks. The banks have a responsibility to help these people who are now struggling through no fault of their own. The housing market is failing not just one but two generations of consumers, with many mortgage prisoners trapped with their current lender and young people excluded from the housing market altogether.”