Brokers have backed the Council of Mortgage Lenders’ warning to the FSA that the mortgage market review could kill off interest-only mortgages.
The FSA has proposed new rules in the MMR that would force borrowers who take out an interest-only mortgage to have a suitable repayment vehicle in place to repay the capital. The regulator wants to make lenders responsible for checking that borrowers have a suitable repayment vehicle in place.
In a newsletter last week, the CML warned that this could restrict the number of options available to borrowers and added that lenders may withdraw interest-only mortgages from the market altogether.
Emba group sales and marketing director Mike Fitzgerald says the Government should step in. He says: “It seems like a kneejerk reaction and the Government ought to step in before any more damage is done. I am not
speaking as a broker but it prevents people having the choice of how to repay their mortgage.”
Coreco director Andrew Montlake says: “When you try and regulate, there has to be an understanding of the consequences. For many people, interest- only is a perfectly legitimate method of taking a mortgage. “It is always difficult when the regulator decides what is best for clients without knowing their particular circumstances.”