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AMI wants 10% borrowing deal for loan prisoners

The Association of Mortgage Intermediaries is calling for “mortgage prisoners” to be able to take on additional borrowing of up to 10 per cent as long as it is in their best interests.

The mortgage market review proposals state that lenders can waive some of the regulator’s affordability rules for mortgage prisoners, for example, those in negative equity or those who have self-certified in the past, if it means no additional borrowing or higher monthly payments.

AMI director Robert Sinclair wants the FSA to allow these people to borrow up to an additional 10 per cent.

He says: “If a consumer wants to change to a fixed-rate mortgage to ensure greater certainty about their expenditure, even if it means an increase to monthly repayments, it may be in their best interests to do so.

“There may be circumstances where a small amount of additional borrowing may be needed to make a house move viable, such as to cover stamp duty, estate agents and removal costs.

“Such flexibility should be left for the lender to determine but we would consider a 10 per cent tolerance on both the additional borrowing and the monthly cost of borrowing to be reasonable.”

Last week, the Financial Services Consumer Panel called for the regulator to implement a new rule immediately to protect borrowers who are unable to make an exit from their current mortgage.

Mortgage Concepts Associates director Mike Richards says: “The FSA should give these people special dispensation to let them move on to another deal.”

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  1. That is quite a useless proposal, both the one made by the Consuemr Panel, and by Robert Sinclair.

    They are concerned about the ever increasing number of mortgage prisonsers. But why should the FSA be required to do anything on this, given that their new MMR affordability rules are not in effect yet?

    Any restrictions we see at present in the market are not imposed by the FSA but are a long overdue reaction by the market to reflect the higher default risk of borrowers (and that risk would be even higher if taxpayers had not been made to support irresponsible borrowers and lenders through £950bn of subsidies). So why should the FSA provide releif on something that is not even a rule yet?

    It is time that all these irresponsible borrowers and lenders face up to the financial decision they made over the years.

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