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High LTV innovation concerns regulator

The FSA says it has concerns about smaller lenders starting to offer higher LTV loans.

In its retail conduct risk outlook today,  the regulator says as a result of six lenders dominating the mortgage market, some smaller lenders with higher funding costs are looking at other ways of competing for business.

One area the FSA says it has seen a number of innovative new products is in the higher loan-to-value sector of the market, with lenders looking at new ways of helping first-time buyers who do not have a 10 per cent deposit or more.

It says some of the products include:

  • New generation guarantor mortgages – unlike existing products, where parents’ income was used to guarantee the mortgage, new schemes can involve parents’ savings being used to offset the child’s mortgage, or a legal charge being taken over a percentage of the parents’ property, which is then used as the deposit.
  • Mortgages where, to help borrowers to obtain a higher loan-to-value mortgage, part of the loan is a non-FSA regulated shared equity loan.

It says it has also seen some firms, operating in niche areas of the mortgage market, which have tried to launch unregulated ‘look alike’ products as alternatives to regulated sale-and-rent-back and equity release products.

Its report says: “We have published consumer alerts to warn consumers of the potential concerns and lack of regulatory protections associated with these products.

“While market conditions remain flat we expect to see more innovation in the mortgage market and we will continue monitoring developments to ensure that, where new products are more complex than a traditional mortgage, the products are clearly targeted and sold to consumers who understand the risks involved.”


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

  1. Clearly the FSA/FCA can no longer be known as the regulator. Terminator, is a more apt description because over the past 10 years it has terminated my pleasure, my income, my good termper, my happiness, my business value and now it wants to terminate innovation in the lending market.

    Well done terminator, where’s John Conner when you need him?

  2. Does this surprise me NO. Once the regulator/Terminator got its feet under the table anyone could see they would dictate products etc. They have no idea how to run a business and unless you use innovation you only go backwards. Why does the FSA think every product is bad. They have no idea.

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