City watchdog clamps down on self-certified mortgages to foster age of 'responsible lending'

Tighter checks on mortgage lending are due to be unveiled by the Financial Services Authority this morning.

The City watchdog is expected to outline new rules designed to ensure only people who can afford mortgage repayments are allowed to borrow money and to foster a new age of “responsible lending”.

The clampdown is expected to include a ban on self-certified mortgages, where customers do not have to prove their income. Banks will also be made liable for loans if they do not check customers can afford them.

In a webcast on the Downing Street website, Gordon Brown said: "I believe lenders should have to carry out proper checks on incomes before agreeing home loans.

"And to protect homebuyers further, we need much tougher rules to make sure that high loan-to-value or high loan-to-income mortgages are offered only when the lender has done rigorous checks to ensure people can keep up repayments."

However, the Council of Mortgage Lenders has warned against bringing in heavy regulation at a difficult time for the industry and said companies have already corrected many of the problems of the past.