Mortgage brokers have defended the use of interest-only mortgages, in a move that backs the warning given to the FSA by the Council of Mortgage Lenders (CML), which claimed that proposed changes could kill off the interest only mortgage altogether.
In its Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review (MMR), the Financial Services Authority has proposed a number of new rules in an effort to prevent the happenings of the credit crunch from re-occurring in the future. One of these rules is set to force any borrower taking out an interest only mortgage to have some form of suitable repayment method in place that will repay the capital at the end of the term. The FSA wants mortgage lenders to take more responsibility in checking that this repayment vehicle is in place.
The CML recently warned that this would not only restrict the number of choices available to mortgage borrowers but would mean that many mortgage lenders would actually withdraw their interest only options entirely.
Critics have claimed that the FSA is giving a ‘knee jerk reaction’ and severe damage could be caused to the mortgage market if this sort of ruling is set in place. Many people see interest only mortgages as a legitimate way to take out a mortgage. Many do this if they have a fluctuating income, such as the self-employed, or if their income is expected to rise quickly in the future, for instance a trainee doctor. Many mortgage advisors are backing the CML’s warning.