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FSA nervous at results of sub-prime probe

The FSA says it is nervous about the results of its investigation into the effectiveness of sub-prime mortgage regulation.

Speaking at the Council of Mortgage Lenders’ annual conference, it said that after banning over 200 non-compliant ads from sub-prime brokers and finding many of those firms were also selling adverse deals to people with no evidence of impaired credit, it is worried about what it will find in next year’s thematic work.

The regulator has already completed its probe into the prime market, which showed regulation is having a largely positive effect although the FSA is worried about payment shocks from cheap introd-uctory deals.

The regulator will look at its policing of the equity release and sub-prime markets next year, areas that it classes as more risky.

FSA director of retail policy Dan Waters said: “The evidence on prime mortgages was strongly positive but the evidence is not that encouraging on sub-prime. We have done thematic work on financial promotions and you saw what happ- ened there.

“This gives worries look- ing at the second stage of the effectiveness review so we are a little nervous after what we have seen with financial promotions.”

CML senior policy adviser Kate Davies said: “The feedback we are getting on Mcob is so far so good. Some people think the FSA has ducked the issue of affordable lending and some people are unclear what the FSA thinks on that.”

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