Featured Product

    FPC Consultation Targets Issues in Mortgage Underwriting Standards

    February 28, 2022

    The Financial Policy Committee (FPC) is seeking views on a proposal to withdraw the affordability test recommendation, which specifies a stress interest rate for lenders when assessing prospective borrowers’ ability to repay a mortgage. The consultation period will end on May 06, 2022 and the decision to withdraw the affordability test recommendation will be made within 12 months.

    FPC had, in 2014, introduced two recommendations to guard against a loosening in mortgage underwriting standards. The recommendations introduced were the  the aforementioned "affordability test" and the loan-to-income (LTI) "flow limit," which limits the number of mortgages that can be extended at LTI ratios at or greater than 4.5. The latest FPC review, which was published in the December 2021 Financial Stability Report, suggests that, out of the two recommendations, the LTI flow limit is likely to play a stronger role than the affordability test in guarding against an increase in aggregate household indebtedness and the number of highly indebted households when house prices rise rapidly. FPC has judged that the LTI flow limit, without the affordability test recommendation, but alongside the wider assessment of affordability required by the FCA’s Mortgage Conduct of Business (MCOB) framework, ought to deliver an appropriate level of resilience to the UK financial system, but in a simpler, more predictable, and more proportionate way. Thus, FPC has decided to maintain the LTI flow limit recommendation and to consult on withdrawing its affordability test recommendation. 

    Consequently, FPC is seeking feedback on the proposal to withdraw its affordability test recommendation and on responses to the following questions:

    • What impact is the affordability test recommendation having on the mortgage market?
    • How would lenders and the mortgage market respond if the Recommendation were withdrawn?
    • What effect withdrawing the Recommendation may have on the housing market as a whole and on particular segments of the market?


    Related Links: 


    Keywords: Europe, UK, Banking, Mortgage Lending, Lending, Financial Stability, BoE, Stress Testing, LTI, FPC

    Featured Experts
    Related Articles

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697