The Financial Services Authority has released its consultation paper on responsible lending and is abolishing self-cert and fast-track mortgages.

Lenders will now have to verify borrowers’ income and they must have evidence that the borrowers declared income figure is accurate.

According to the FSA: ‘Although lenders will be responsible for verifying income and assessing affordability, consumers will be more actively engaged with the mortgage process by providing evidence of their income to demonstrate that they can afford the mortgage.’

The evidence must come from a source, independent of the applicant but this can come from an applicant’s employer, bank, accountant or HMRC.

The FSA also requires mortgage affordability to be assessed on a capital repayment basis, even where the mortgage is approved on an interest-only basis.

Michael Coogan, director general of the Council of Mortgage Lenders said: "There will always be a regulatory trade-off between protecting consumers from over-borrowing, and increasing the barriers to home-ownership. The mortgage market for the time being has already corrected, to a degree that the main consumer concern right now is about access to finance, not about risky lending.

"The risk is that the gain will not match the pain in the short term. The industry and consumers will feel the costs of imposing new regulatory requirements now, in a market where they are not needed, but the potential consumer benefits will only be felt at some unspecified time in the future.”