AMI says let interest-only remortgage holders borrow another 10 per cent.

Interest-only remortgage customers who may be come trapped in their current deal because of proposed FSA lending changes, should be allowed to borrow an additional 10 per cent according to the Association of Mortgage Intermediaries.

The AMI advise potential 'mortgage prisoners' should be allowed to take on additional borrowing providing it is in their best interest.

MMR proposals state lenders may waive some affordability rules for those interest-only remortgage customers who are in negative equity or were self-certified in the past, providing there is no additional borrowing.

However, Robert Sinclair who is the AMI director has said that the FSA should allow mortgage-holders to borrow an additional 10 per cent to allow them to escape their mortgage prison.

He added that if a home-owner wants to switch to a fixed rate deal to increase the level of certainty in their expenditure, they should be allowed to do so even if this results in increased monthly repayments providing it is in the mortgage-holders best interest.

He went on to say that in certain circumstances a small increase in borrowing may make a house move viable. Such flexibility should be left to the lender but the AMI consider a 10 per cent tolerance for additional borrowing a reasonable amount.  He adds that it is probable that the scale of the problem which could face interest-only remortgage prisoners may only be revealed when the BOE increases the base rate.

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