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Brokers don’t fear interest-only probe

Most brokers do not believe the advice process surrounding interest-only mortgages will lead to a future misselling scandal despite the forthcoming investigation by the FSA.

Research commissioned by Alliance & Leicester shows that only 31 per cent of intermediaries are concerned about complaints.

Forty-five per cent do not believe the advice process on interest-only is a genuine concern and 24 per cent think it could be a concern but not a misselling issue.

The FSA will be conducting research into the market shortly amid concerns that many interest-only borrowers are not being advised to take out a repayment vehicle to pay off the capital on their loan.

Figures from the Council of Mortgage Lenders released last month showed that over 200,000 people in the UK had an interest-only mortgage without having a repayment vehicle in place.

A number of brokers have recently voiced concerns about interest-only loans. Premier Mortgage Service managing director John Malone has raised fears that claim-chasers could soon target the sector.

Alliance & Leicester head of intermediary mortgages Mehrdad Yousefi says: “This is an industrywide concern but it is not a misselling issue. Brokers are well aware that it is absolutely necessary to ensure that clients have a repayment vehicle in place and that they are fully aware of the risks associated with any mortgage where there is no provision to repay the capital element.”

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