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‘IFRS rules will hit discounted loans’

The introduction of international financial reporting standards could lead to a trend away from discounted mortgage rates, says BM Sol- utions managing director Tim Hague.

Under the new IFRS rules, which relate to accounting periods ending after April 2005, lenders have to report the average return based on the income received over the life of a mortgage rather than the income received each year, says Hague.

He warns that this will make the balance sheets of lenders doing large amounts of discounted business look as though they are always carrying shortfalls.

Similarly, he says the timing of products to create income levels at certain times will become irrelevant.

Hague says the IFRS rules will have the potential to force a change in the industry’s established business practices and strategies away from front-end discounts.

Hague says: “In implementing IFRS, the industry clearly has a learning pro- cess ahead of it. It is early days and no doubt there will, as with many situations, be those who lead and those who follow.”

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