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Fitch warns FSA mortgage reforms may backfire

Fitch Ratings has warned that the FSA’s proposed reforms to the mortgage market could mean greater use of manual underwriting, pushing up costs for lenders and these in turn are likely to hit borrowers.

The firm believes that the FSA’s mortgage market review is expected to improve underwriting practices but these are likely to be more manual
It predicts that costs will be passed on to borrowers, leading to higher standard variable rates for mortgage lenders. It says higher costs may tip the balance for some borrowers, making a loan unaffordable.

European structured finance operational risk group director Robbie Sargent says: “This will lengthen the mortgage application process and push up costs for the lender, which may in turn be passed on to borrowers in the form of higher interest rates and/or product fees.”

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