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Increase in interest-only mortgages with no repayment vehicle

The FSA has reported an increase in the proportion of interest-only mortgages where the lender was not aware of a dedicated repayment vehicle, even though the regulator is looking to clamp down on this type of lending.

The FSA’s annual product sales data, from April 2009 to March 2010, reveals that 19 per cent of mortgages sold were interest-only loans where the borrower did not have a designated repayment method or where the lender was not aware of one, compared to 15 per cent of mortgages the previous year. The overall proportion of interest-only mortgages reduced by 8.7 per cent to 28 per cent.

The figures come after the FSA has previously stated it would look to open discussions with lenders to see how their controls around interest-only mortgages could be tightened. The regulator says it plans to consult on them later in the year.

The report also reveals that 67 per cent of all retail investment product sales were sold on an advised basis, a similar percentage to 2008/09.

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  1. As we said in our Press Release of 09 August; the lack of a credible means of repaying an interest only mortgage, coupled with lender’s failing to offer a rolled-up interest product at the end of term, will increase the need for specialist equity release advice. Time to get qualified ladies and gents! Simon Chalk, Later Life Planner atLaterLiving.

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