Transitional arrangements to help interest only mortgage prisoners.
The plight of interest only mortgage prisoners has been given a considerable amount of press coverage.
The CML advise that the problem is not as great as the press have made out and that there is no need for mortgage holders on an interest only deal to panic. However it can be argued that some interest only mortgage holders many find themselves disadvantaged, and their choices restricted by an equity level that no longer meets newly tightened lending criteria.
The FSA are fully aware that one consequence of the new mortgage rules for interest only lending, could be restricted choice for existing mortgage holders looking to switch deals and remortgage. The FSA have therefore proposed transitional arrangements suggesting new affordability rules need not apply to those on existing interest only deals.
The FSA advise affordability rules for existing borrowers can be waived providing there is no additional borrowing, no higher monthly payments and no lengthening of the mortgage term.
The FSA propose that transitional arrangements cannot be applied to mortgage holders who have previously been in arrears or have had payment shortfalls. Also existing borrowers may not be removed from the mortgage agreement or new ones added.
Deal Direct question the amount of flexibility the proposed transitional arrangements offer lenders in helping interest only borrowers.
More home-owners could perhaps be helped if the FSA were to allow exceptions to its responsible lender policy. Lenders would then be able help more mortgage prisoners. We feel sometimes increasing monthly repayments can be in customers best interests.
If you are an interest only mortgage holder looking for advice and a review of your remortgage options contact Deal Direct. We are dedicated to helping potential mortgage prisoners find a new deal.
