View more on these topics

Prime probe shows short-term focus

FSA has concerns over cheap introductory offers

The FSA has raised concerns that cheap introductory offers in the mainstream mortgage market could lead to borrowers struggling to pay off their homeloans.

In the regulator’s first major blast at the prime lending market, in its effectiveness review of mortgage regulation, it found that 41 per cent of customers choose a mortgage on price but focus on the initial payments rather than longer-term affordability.

In January, Leeds Building Society introduced a 1.89 per cent homeloan deal that rocketed by almost 350 per cent after two years.

The FSA also found that average APRs have risen by almost 1 per cent since before M-Day while lenders’ retention levels have improved since mortgage regulation, partly due to exit fees almost doubling and set-up fees up by 52 per cent.

The FSA is also concerned that some prime brokers and lenders fail to provide initial disclosure documents, with phone sales practices faring worse. It found that IDDs were issued by intermediaries in 73 per cent of face-to-face interviews where required but only in 28 per cent of phone interviews.

It says mortgage regulation is working well in the prime sector and it has no plans to alter any rules but “there continues to be pockets of non-compliance relating to basic requirements”.

The FSA says that it will look into the effectiveness of regulation in the sub-prime and lifetime mortgage markets next year.

It says: “There is a potential risk that consumers may get a payment shock when the discount period ends if they take out a very low rate, but where there are no foreseeable changes in the customer’s circumstances that mean the payments are affordable.”

Alexander Hall chief operating officer Andy Pratt says: “Brokers have to educate customers about affordability as we get a lot of people coming in thinking in the short term.”

Recommended

100 Stocks and 10 managers for UK best ideas fund

Skandia has released the final line-up of the UK best-ideas fund, complete with an indication of the asset allocation based on a model portfolio. The fund will comprise 100 stocks and feature the best 10 ideas of 10 UK managers. Axa Framlington has two managers in the fund – George Luckraft and Roger Whiteoak, plus […]

Mutual trends

Consolidation had become a distant memory until Nationwide’s takeover of Portman. If more lenders increase competition, then surely fewer lenders will have the opposite effect?

Strike a poso

If moving home is one of the most stressful things that most people do in their lives, there can be little doubt that applying for the mortgage is one of the most stressful parts of that process.

Delegates told IHT should stay but be made fairer

The LibDems will not advocate scrapping inheritance tax but are looking at measures such as axing the gift rules in an attempt to make the tax fairer. Speaking at a tax commission debate in Brighton, Shadow Chancellor Vince Cable said the basic principles of IHT were “hard to quarrel with” but he would be looking […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com