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Over-zealous expenditure checks too much, says FSA

Expenditure checks that include non-essential purchases such as clothing are not appropriate when assessing mortgage affordability, says the Financial Services Authority.

Giving evidence to a Treasury Select Committee hearing on the Mortgage Market Review today, FSA chairman Lord Turner admitted the regulator’s initial proposals on affordability assessments were impractical.

Last month, Abbey for Intermediaries changed its expenditure assessment to require all customers to fill out regular and non-regular monthly costs, with the latter category including religious festivals, holidays and miscellaneous goods and services.

Previously, Abbey would use Office for National Statistics data to obtain an average expenditure for a customer.

In its 2010 MMR consultation paper on responsible lending, the FSA stated that lenders should take into account expenditure on items such as food, clothing and recreation when assessing affordability.

But in its final consultation paper published in December 2011, the regulator modified that proposal to state that only committed and essential expenditure such as utility bills need be included.

Turner told MPs: “We initially put forward a set of proposals on how to calculate whether a mortgage is affordable which were theoretically desirable but just too complicated to put into place. They required a degree of asking questions about borrowers’ expenditure which were too detailed.”

He adds: “I think the proposals we have come up with have been hugely improved by that process of setting things out, listening to the industry and engaging in intensive debate.”


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  • Steve Reynolds 16th March 2012 at 9:48 am

    IF you are not discussing affordability before you source a mortgage deal, you are failing the client and breaching the rules. stop moaning, affordability is more relevant than income multiples

  • Darren Hall 15th March 2012 at 10:04 am

    I already obtain this information when carrying out a mortgage fact finding interview with a client. In some cases this has clearly demonstrated that the requested mortgage would not be affordable and as a result the client revised their maximum purchase price and mortgage to fit in with there income and expenditure. If you are an adviser then advise dont just sell!!!

  • Steve smith 14th March 2012 at 5:35 pm

    I has a case declined last week because the client spent too much on yoghurt.

  • shock horror 14th March 2012 at 3:58 pm

    Am I missing something re Anon 3:10?

    If the customer doesn’t pay for these items DON’T INCLUDE THEM! It doesn’t get any easier than that really.

    If I don’t eat yoghurt and Sainsburys have sold out of yoghurt when I do my weekly shop I carry on shopping, I DON’T stand in the yoghurt aisle for 30 minutes talking about yoghurt.

    Some people on here do worry me

  • Mary Lockyer 14th March 2012 at 3:10 pm

    It is ridiculous to include religious holidays as Jehovahs witnesses keep none, nor do they keep birthdays, and some will shop at M & S food and others at LIDL, affordability should be demonstrable and believeable, a simple look at a bank statement tells a lot about expenditure. 10% take a coffee at Costa or Nero every day, we are not all the same !