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FSA to issue warning on lease options

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The FSA is to issue a warning on lease options, financially risky agreements whereby distressed sellers hand over the running of their property to an investor for a set period of time

A report by 5 Live Investigates at the weekend exposed a growing trend for this type of deal, in which struggling mortgage borrowers agree to lease their property to an investor for a specified period before selling it to them at a price based on its current worth.

The investor pays the mortgage over this period, normally bringing in tenants to do so. At the end of the period, they purchase the house for the agreed price and hope to sell it for a profit if house prices have risen.

But the programme revealed that the sellers can end up facing repossession and financial ruin if the investor fails to keep up the mortgage repayments, and brought the issue to the attention of the FSA, which says it will be publishing a warning to consumers on lease options in the next few days.

A spokesman for the FSA says: “The FSA is aware that some homeowners may be considering ‘lease options’ or ‘exchange with delayed completion’ deals as a way to help them reduce the strain on their finances.

“These products may not always put the homeowner in a better place than if they were to sell their house under normal circumstances, and to that end we will shortly be publishing information on our consumer information website to help explain how they work and what the risks are.”

John Charcol senior technical manager Ray Boulger says many rogue individuals who were operating in the sale-and-rent-back market before it was regulated have now moved into lease options.

He says: “The government needs to look at whether lease options should be regulated; if regulation was right for sale-and-rent-back, it is probably right for lease options too.”

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Comments

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

  1. Typical of the FSA – always a lap behind! It takes a journalist to raise the problem that we all know exists beforte they do anything!

    Where would we be without regulatory intervention………..?

  2. @ Paul Bryanton. Were you really aware of this? It’s so easy to slag off the fsa but is it justified in this case?

  3. Typical- FSA always step in thinking they are protecting everyone,yet they effortlessly make the situation worse.(in every industry you always have this ie honest plumbers and rogue plumbers,however the majority of them are honest ) its the same in property investing-the only people that lose out will be the sellers.They are screwed-no one is going to be helping them out of the predicament the majority of them find themselves in -not the bankrupt banks nor our bankrupt governments-yet these jokers think they are protecting home sellers.In fairness they may help 1 or 2 from having this happen to them, but will take away another solution from thousands and thousands of other desperate sellers and ultimately make it much worse for them when they go on to get repossessed and lose everything.Wake up please before you go on to ruin many more lives FSA

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