Mortgage providers in the UK will be required to verify the income of a borrowers, including freelancers and contractors, before a mortgage deal can be arranged.
In addition to the income verification requirement for all mortgage applicants, affordability tests will be imposed on all self-employed people who apply for a mortgage and extra protection will be provided for vulnerable borrowers.
These new rules could mean that freelancers and contractors who have an irregular income will have to wait longer before they can apply for a mortgage. The individual will be responsible for gathering a track record of their income and it is expected that this record will need to cover the past three years.
If this is impossible, they will have to provide the lender with bank statements, a confirmation of income from an accountant and other evidence supplied by HMRC.
Freelancers and contractors with poor credit ratings could also find that they are restricted in their borrowing.
In recent years, a lot of lenders have not been asking for income verification. Between 2007 and Q1 of this year, nearly 50% of all mortgages have been granted without it.
FSA director, Lesley Titcomb, said that there is a definite link between overstretched finances and mortgage arrears and home repossessions. The FSA is committed to protecting consumers who are vulnerable by ensuring that everybody who takes out a mortgage has the means to meet their repayments.
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