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Tougher rules on mortgages

Tougher mortgage rules to make sure borrowers can only take out deals they can afford have been outlined by the financial services regulator. The shake-up, which comes into force in April 2014, is the result of a long-running review by the FSA.

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FSA warned of mortgage 'ticking time bomb'

The FSA has previously warned that a "ticking time bomb" has been created over the last 20 years, with an estimated 1.5 million interest-only loans worth around £120 billion due for repayment in the next decade.

Such deals allow borrowers to pay off the capital only when the mortgage term ends, but lenders have abruptly cut back on them amid concerns people cannot afford to pay them back.

The FSA is looking at how many interest-only borrowers will be unable to repay their loans and plans to publish its findings next spring.

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