View more on these topics

Borrowers will be hit by cap on equity withdrawal

John Charcol senior technical manager Ray Boulger says the FSA’s proposals for a cap on equity withdrawal will lead to severe consumer detriment.

In its mortgage market review last week, the FSA says it will look at whether there is a need to limit the amount of equity that a consumer can take from their home.

It says its early analysis suggests that equity withdrawal may conceal and exacerbate affordability problems because the cash might be used to repay outstanding mortgage debt, resulting in higher, less affordable mortgage payments.

It adds that external analysts consider the arrears’ performance of remortgages with equity withdrawal to be consistently worse than home purchases. It says: “One solution may be to limit the amount of equity a consumer can withdraw.”

Boulger says this is “a thoroughly bad idea” and would be impossible to police.

He says: “In practice, there will be severe consumer detriment if the FSA bans that, because the reason that people use equity withdrawal is to reduce their debt or to buy a car, for example. If they are no longer able to do this, then they would have to go to other sources of lending.

“People may end up moving house just so they can withdraw equity.”


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm