Interest-only mortgage ban denied by FSA.
The intention to ban interest-only mortgage lending in the UK has been strongly denied by the FSA.
In a recent speech Lynda Blackwell on behalf of the regulator, stated the FSA was not using the MMR to ban interest-only mortgage products. She added that the FSA also has no intention of being prescriptive about acceptable types of repayment vehicles.
Ms. Blackwell also revealed a number of UK lenders have advised that they want a ban on interest-only lending. She said that the FSA take the view that interest-only products remain suitable for some borrowers, adding that the FSA have advised lenders to make an informed judgement when approving a deal.
In terms of a lenders review of a borrower’s repayment vehicle, Blackwell went on to say that the FSA require lenders to check at least once during the mortgage term that the repayment vehicle is on track and performing.
It has now been confirmed that the sale of the property as a means to repay the capital owed would not be banned, but lenders would need to very carefully consider whether it is indeed an acceptable method of repayment.
A Nationwide spokesperson in response has voiced concerns as to how lenders policy on interest-only mortgage lending would be viewed down the line, adding repayment vehicles should be reviewed more than once.
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