subject: Mortgage financiers 'should be able to offer interest-only home credit deals' [print this page] Mortgage financiers 'should be able to offer interest-only home credit deals'
An expert has said that FSA proposals could spell the end of interest-only mortgages.
Home credit lenders should continue offering consumers the opportunity to take out interest-only mortgage deals in the aftermath of the global economic downturn, an expert has said.
According to Paula John, editor-in-chief at Your Mortgage, such products - which may include tracker mortgages - should remain a fixture in the range of packages available from financiers, as their abolition would be unnecessary and could lead to fewer people being able to take out a home credit product.
Ms John's comments came after the Intermediary Mortgage Lenders Association (IMLA) earlier this week (October 11th) warned that interest-only deals will effectively become a thing of the past if the Financial Services Authority (FSA) presses ahead with its proposals to overhaul the market.
Earlier this year, the FSA announced that it wanted to oversee a system whereby measures such as suitability tests were put in place in order to make sure that borrowers can definitely afford their repayment plan.
Also required under the FSA's plans would be verification of a loanee's income to prevent any possibility of mortgage fraud.
However, IMLA has stated that these tightening policies over the sector would force banks and building societies to withdraw their services from this area of the home credit market.
Instead of imposing such rules - which it labelled "inflexible" - IMLA has suggested that the FSA should make simpler changes, which would allow financiers to continue judging each case of lending on its individual merits.
And this notion is supported by Ms John, who believes despite the fact that "it makes sense to have regulations in place for when the market picks up again", the FSA's proposals go a step too far.
"I think [the IMLA] is right in sounding a warning bell that we could throw the baby out with the bath water and see the end of interest-only mortgages altogether," she concluded.
Those looking to qualify for a decent mortgage deal are emptying their savings accounts in an efford to bump up their deposits.
