View more on these topics

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.”

Recommended

Fidelity launches global demographic fund

Fidelity has launched a global demographic fund designed with a focus on companies that stand to gain from long-term sociological developments. The Fidleity global deographics fund will be managed by Hilary Natoff and Nicky Stafford and represents an unconstrained portfolio of between 50 and 80 stocks, covering an investment universe of 1,000 companies. Natoff says: […]

Labour calls for new pension tax relief restrictions

Labour says those earning over £150,000 per year should only be able to claim 26 per cent tax relief on their pensions so cuts to tax credits can be reversed. At a press conference yesterday, Labour leader Ed Miliband and Shadow Chancellor Ed Balls called on the Chancellor to reverse his decision made in last […]

4

Osborne considers launch of 100-year bond

Chancellor George Osborne aims to launch a Government bond with a repayment date lasting 100 years or more to take advantage of historically low interest rates. In next week’s Budget, Osborne is expected to announce plans for the Debt Management Office to test market appetite for the “super-long gilts”. According to reports, the Chancellor also […]

1

Ignis strategic head departs- up to 20 jobs at risk

Ignis Asset Management head of strategic alliances Nick Pogmore has been made redundant and up to 20 staff have been put on consultation as part of a review of the firm’s distribution roles. Pogmore joined Ignis in November 2009 and was responsible for developing relationships with UK fund platforms, life offices, national IFAs and advisory […]

Life cover for life

Jennifer Gilchrist Proposition Lead – Design, Royal London When someone mentions whole of life plans, most people will think of a niche product that serves as an inheritance tax planning tool for high-net-worth clients. And it’s really not surprising they’ve been pigeonholed in that way because before the arrival of RDR in 2013, that’s more […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

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.

Leave a comment