Mortgage affordability tests mooted
The Financial Services Authority has proposed affordability tests on all home loans and a ban on self-certification mortgages.
The City watchdog also targets sub-prime and "toxic combinations" that lend too high a proportion of a property's value to people with poor credit histories.
At the same time it wants to bring buy-to-let mortgages and all other lending secured on a property within its regulatory scope.
The FSA says in its Mortgage Market Review that the proposals reflect a shift to a more "intrusive and interventionist" style of regulation.
It wants to ensure that lenders are responsible for assessing a housebuyers's ability to repay the loan by taking monthly disposable incomes into account.
Firms will also have to verify income, ending both self-certification mortgages, which are aimed at self-employed people with irregular incomes, and fast-track mortgages, under which people are not obliged to prove their income.
All mortgage advisers will have to be personally accountable to the FSA under the proposed regime.
The regulator says that in January it will publish specific proposals to toughen the rules on the way lenders handle customers who are in arrears.
These will include a ban on administrative charges for borrowers who are on repayment plans to ensure that firms do not profit from people in arrears.
It adds that five mortgage firms have already been referred to enforcement for the way they handle people who have fallen behind with their mortgage and for levying excessive arrears charges.