16:46 25 April 2014
New rules – known as Mortgage Market Review - will see mortgage applicants facing tougher questions about their lifestyle to ensure that they can afford to repay the money that they borrow. Questions from lenders may include queries over childcare costs and even haircuts.
Despite being the biggest change to the mortgage market in more than a decade, the Council of Mortgage Lenders are confident that the new rule will be enforced smoothly although it may mean delays and rejections of applications.
The new rules were drawn up during the financial crisis and were supposed to take effect last summer. However, consultation with lenders led to last minute changes.
Martin Wheatley, the chief executive of the FCA, said: "The core principle is a very sensible one - lend to people what they can afford to repay.
"We've come out of a period, particularly in 2008-09, when there was no attempt to verify people's ability to pay, and we've ended up with lots of payment problems, lots of people in mortgages that are problematic for them, and if we had a different interest rate environment we'd see a lot of foreclosures."