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FSA gives alert on property income

The FSA has warned homeowners about the dangers of overestimating the income they could receive from their property.

The issue of falling property prices is highlighted in the FSA’s annual Financial Risk Outlook released last week.

Other issues include structural changes affecting distribution of retail products, the volume of international regulatory reform and the need for complex retail products to have careful marketing and promotion that should only be bought by consumers who understand the risks.

The report warns about the broader risks that the threat of terrorism in London and financial fraud by individuals could cause to firms.

Research by the FSA shows that consumers primarily want peace of mind.

Firms were warned by the FSA about the dangers of misrepresenting the risks of products and of any guarantees of capital return that are made.

The regulator urges consumers to take advice if they do not understand financial products or the implications they might have on their income.

It says: “Although property prices have risen strongly in recent years, this will not always be the case; and consumers may overestimate the income that property will provide, as well as the costs and difficulties associated with releasing their capital.

“Trading down, or moving out of urban areas will provide less of a windfall if many other consumers have similar plans, influencing prices in segments of the market. Firms will have to contribute to consumer confidence by treating customers fairly.”

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