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CML plans own probe of interest-only

The Council of Mortgage Lenders is likely to conduct its own investigations into the interest-only market as it claims to have learned little from the FSA’s recent probe.

It plans to look closer at FSA consumer research published last month and conduct its own internal work before deciding whether to press ahead with a more formal probe to discover if consumers are being sold the right mortgage with the correct repayment advice.

The UK’s biggest lender HBOS is also understood to be conducting research into the sector.

The FSA found that consumer understanding of interest-only mortgages is high but 10 per cent of borrowers have no idea or only a rough idea of their repayment plan, with a further 5 per cent having only a weak plan in place.

CML head of research Bob Pannell says the FSA’s work is generalist and fails to “nail things down”.

He says: “The FSA research did not take us further forward. We want to understand a bit more whether there is a mis-match between borrowers’ experience and expectations and the products they have chosen, to ascertain whether there are any issues that lenders need to think about. We are considering doing follow-up work.”

John Charcol senior technical director Ray Boulger says: “I got a lot from the FSA report and was encouraged that 90 per cent of people had a plan in place.”

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