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FSA to blame for interest-only fallout

Do the new regulators understand that Interest Only has it’s place? The FSA didn’t seem to.

How about people buying BTL properties, doing them up and then renting them out for a few years before selling them on? Interest only is a decent option for some landlords.

How about long term interest only mortgages as an alternative to roll up lifetime mortgages with much higher interest rates? As long as retired can afford the monthly payments, what is the problem?

How about flexible interest only mortgages whereby a self employed person can make lump sum capital repayments to suit their cash flow? In leaner times lower payments can assist enormously.

The FSA, it seems to me, painted “interest only” as high risk and basically a dirty word as a knee jerk reaction to the financial crisis.

Is it any wonder UK lenders have subsequently pulled out of the market?

Julie B


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. RegulatorSaurusRex 4th April 2013 at 3:50 pm

    Yes, it was my fault, but now I’m extinct the ‘new’ regulator might reverse what HM Treasury told me to do.

  2. If young workers with a reasonable income could secure an IO, many of them would be paying less than they do in rent to a landlord.
    There is a chance that the property may grow in value especially through improvements.
    A family home could be secured with an IO and sold when the kids have left home.
    As long as it is understood by the purchaser that an IO does what it says on the tin ONLY PAYS THE INTEREST, what is the problem?
    I know of one young couple paying £900.00 per month for a 2 bed flat. If they could get an IO on a similar property the monthly payments would be around £500.00 per month.

  3. I agree with Anonymous | 4 Apr 2013 5:46 pm. I bought my first home when I was 21 the same year I was married as I’d started work at 18, stayed at home, only drunk alcahol in the all Ranks Bar of my TA unit and saved like mad. Our wedding was low key and we borrowed a car from my brother in law and went to Devon as we couldn’t afford a house AND a car until a few years later.
    When our second child came along we moved from our 21/2 end of terrace to a 4 bed detached in a lovely street, which we did up with an interst only mortgage over 16 years, when the children left 3 years ago, with my clients knowledge we downsized to a 1 bed flat on a repayment and bought a 2 bed flat to let until we wee settled again for a year and using skype to maintian the advice process when needed, we went to Oz and NZ for 3 months.
    Downsizing was the right thing to do now for us, just as having an interest only mortgage when our children were young was the right thing. Clients should be able to take advice and be able to rely on their adviser carrying out an adequate “Know your Client” excercise so that they can RECCOMEND whether Interst only or Repayment is approrpiate for the client based on their attitude to risk, capacity for loss and all those things that an INVESTMENT adviser is supposed to consider, but some (not all as there are a lot of really good mortgage adviser still out there) conveniently overlooked in order to get their sale.
    We have worked ona fee basis for mortgages and protection for as long as we have worked our adviser charging model, back when it was going to be called Customer Agreed Remuneration and even before that we charged a fee for our mortgage advice back in 1998 so we could reccomend someone NOT to do something and still be paid something for doing the right thing.
    The FCA needs to back off with a lot of things now we are post RDR and incraese its focus on where things remain broken, i.e. NON ADVISED which appears to be being allowed to give less protection than an execution only customer and the rubbish which is commission being paid on non-advised and execution only and NOT on advised when often the advised service is actually cheaper than the non advised! I don’t know if Dual pricing is still a problem as to be frank when the FSA’s Lesley Titcombe ignored the warnings I thought it better to focus on finishing my level 4 and focusing on my Investment and Pension business until the dust had settled on the pigs ear of everything the FSA had done contrary to the feedback in a lot of their consultation papers.
    Stuart Duncan and Julian Stevens have all pointed out issues repeatedly to the FSA, lets hope the FCA (even if they are the same company number and hence I would argue, why have we only been given 6 months to change all our headed paper to the FCA, when their Registered number has NOT changed) are different in something OTHER than name!

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