The FSA has announced major reforms to the UK mortgage market in an effort to make it more sustainable.

The Financial Services Authority (FSA) has announced major reforms to the current UK mortgage market including the introduction of affordability tests for all borrowers.

Self-certification mortgages will also be banned under the new proposals announced today (19 October). During the housing boom, these mortgages were popular as customers did not have to provide income details.

The FSA hopes the new plans will force lenders to take more responsibility when assessing the consumer’s ability to pay.

Further regulatory measures include the banning of arrears charges when borrowers are already repaying, making all mortgage advisers personally accountable to the FSA, and banning the sale of toxic combination mortgages that put borrowers at risk.

The industry will have until 30 January 2010 to comment on the reforms.

Jon Pain, FSA Managing Director of Supervision, said: “The mortgage market has seen extraordinary upheaval over the last 18 months and whilst it has worked well for the vast majority of borrowers, some have suffered great financial distress.

“The FSA needs to ensure that firms only lend to people who can afford to pay the money back. The reforms that we have announced today will ensure that the mortgage market works better for consumers and that it is sustainable for firms.”

Michael Coogan, Director General at the Council of Mortgage Lenders, commented on the news: “We agree […] that clearly delineated responsibilities, which remove regulatory ambivalence, will help lenders, intermediaries and consumers to know where they stand, and to accept the consequence of their actions.”