MMR: Interest-only mortgages get stay of execution but can new rules save 'mortgage prisoners' | Mail Online

MMR: Interest-only mortgages get stay of execution but can new rules save 'mortgage prisoners' | Mail Online

Tougher new rules to stop reckless lending have finally been revealed by the financial watchdog, along with a bid to stop boom-era borrowers ending up as ‘mortgage prisoners’.

Interest-only mortgages have received a stay of execution under the plans, while older homeowners will still be able to borrow into their pension years and lenders will be told not to abandon homeowners who over-extended during the property boom.

But ‘hard-wired common sense’ lending rules will demand banks and building societies apply far more stringent checks on whether homeowners can afford their mortgages and many will be forced to take financial advice to get a home loan.

Mortgages are likely to take longer to obtain and costs may rise as most borrowers will be made to speak to qualified advisers.

Along with the new rules a damning document highlighting the reckless lending of the boom years was published.

It revealed 77% of interest-only mortgages have no reported repayment strategy and how a large proportion of these had been sold to higher risk borrowers.