The thin end of the wedge

From the BBC:

Some 140,000 homeowners are trapped on high interest-rate home loans with unregulated or inactive firms, and are unable to switch to a cheaper deal. The Financial Conduct Authority (FCA) has now said it is considering a change to its affordability checks.

This could allow these people to switch to deals that are easier to pay. At present, they are stuck on high default rates, owing to an FCA requirement – introduced in 2014 – for mortgage holders to meet strict affordability criteria when they apply for a new fixed deal.

OK, so Annie and Bert, took out a six-times income, 100% LTV mortgage under the old reckless lending rules but banks can only lend a ‘sensible’ multiple like four-times-income. They’ll make an exception for Annie and Bert.

What about Claire and David next door, who took out a four-times-income and have done equity release to ‘tap into house price growth’ and now owe six-times-income?

What about Ellie and Fred across the road who took out personal loans to pay a deposit and a four-times-income mortgage who also owe six-times-income?

If that’s OK for Ellie and Fred, what about Georgina and Harry, first time buyers who want to borrow six-time-income but can’t? Can they reverse engineer Ellie and Fred’s position by taking out two-times-income personal loans and using that as a deposit for a four-times-income-mortgage?

Where’s a loophole, there’s a way.