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FCA to investigate interest-only mortgages

The FCA is to investigate lenders with interest-only mortgage books to make sure customers are being treated fairly.

The regulator unveiled the thematic review in its 2017/18 business plan today.

The FCA says: “Around 1.8 million UK homeowners currently have outstanding interest-only mortgages, excluding buy-to-let, and many do not have an appropriate strategy to repay them.

“We will look at how firms treat borrowers whose interest-only mortgages are approaching maturity and their ability to ensure these customers are treated fairly.

“This will include those interest-only mortgages that are due to be repaid by 2020 – where borrowers have the least amount of time to find a solution.”

The regulator has delivered mixed messages when it comes to interest-only mortgages.

In 2012 former FCA chief executive Martin Wheatley said the loans could be a “ticking time bomb” because of a wave of maturing loans with no repayment strategies.

But in April 2013 the FCA said it was worried about a lack of interest-only mortgages after most lenders pulled out of the market ahead of the Mortgage Market Review’s tougher repayment rules.

Then in August 2013 the regulator asked lenders to contact interest-only borrowers whose mortgages are due to mature by the end of 2020 about how they plan to repay their loans.

The FCA carried out thematic reviews into interest-only loans in 2013 and 2014.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Too little to late the damage to holders of these mortgages has already been done with massive hikes in interest payments through affordability blackmail or loss of property. The FCA hoped it would all go away under natural wastage (see repossession) now it has returned to the agenda as mortgage holders fought back recently in the courts.

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