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Turner says it’s not OK to base loans on price rises

The overriding principle of the mortgage market review is that banks should not lend to borrowers who cannot afford a mortgage based on a belief that property prices will rise, according to FSA chairman Adair Turner.

Giving evidence to the Treasury select committee last week, Turner said this is the first time the FSA has addressed the issue of lenders advancing money in the hope that house prices will go up. He said: “We have not previously said it is not ok to lend money against the expectation of rising prices.

“Though the MMR is hundreds of pages long, this is probably the single biggest principle there, which is it is not OK to lend money knowing the person cannot afford to pay it back but everything will be ok because house prices are going to go up. It was the problem to a degree in the UK and was the absolute core of the US sub-prime disaster.”

London & Country associate director of communications David Hollingworth says: “We can already see the effect the MMR is having on lender criteria, with the new proposals already causing lenders to make changes especially on interest-only criteria. We have also witnessed lenders less willing to lend at higher LTVs and there has been a general tightening of criteria all round.”

Chadney Bulgin mortgage partner Jonathan Clark says: “The mortgage market review will put a stop to more relaxed lending practices where lenders were taking a bet against rising house prices.

“But it would be a shame if this killed off higher LTV lending as first-time buyers would be at a disadvantage.”


Mortgage Advice Bureau acquires Mortgage Talk

Mortgage Advice Bureau has acquired the brokerage Mortgage Talk in exchange for shares in the MAB group. As a result of the deal, MT chairman Peter Birch will join the MAB board as the second largest shareholder. MAB chief executive Peter Brodnicki (pictured) will continue to run the company and will retain a majority stake […]


Structured product providers warned against ‘pushing products’ on advisers

The FSA has told structured product providers their adviser training sessions should not be about “pushing products” but instead should educate advisers about how products work and highlight the risks posed. The regulator has published its final guidance on structured products, following a guidance consultation in November. Between November 2010 and May 2011 the FSA […]

Equitable Life to rethink adjuster in FSA crackdown

Equitable Life says it will have to consider whether it can continue to levy a “financial adjustment” on policyholders that leave the fund following the FSA’s clampdown on market value reductions. This month, the regulator moved to prevent with-profits providers from charging an MVR if they suffer liquidity problems as a result of members leaving […]


Lakey launches CI comparison website

Highclere Financial Services partner Alan Lakey has set up a critical illness insurance comparison website which allows advisers to compare policies from every CI cover provider. allows advisers to key in client details and the website will generate a list of suitable products. For each policy, the site offers a detailed list of conditions […]

2016 Global Survey of Individual Investors: How is investor behaviour rewriting the job description for financial professionals?

Trapped between expectations for near double-digit returns and strong apprehensions about investing in persistently volatile markets, investors worldwide are of the opinion that professional financial advice is worth the fee. But even though they believe individuals who work with a financial professional are more likely to achieve their goals, investors have a clear vision of […]


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