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New rules will apply in 2013
The Financial Services Consumer Panel has said it is concerned for all of the borrowers who could be charged a higher interest rate on their mortgages because they are unable to move their deal elsewhere to another lender. Those on the panel say that the vulnerable home owners may find themselves in a situation where they feel trapped within their existing deal and are likely to suffer under any more strict lending rules once they come into place resulting in unfair treatment.
There are hundreds of thousands of borrowers who are on interest only deals who are unable to remortgage and others who have been victims of sharp interest rate rises. The plan is to be brought in after 2013 with some stricter rules not put into place until after the housing market had shown some signs of recovery.
The panel is a statutory body that advises the Financial Services Authority (FSA), which is clamping down on irresponsible lending and making sure borrowers can only take out mortgages they can afford. It suggested that the FSA may need to delay its plans in order to allow the housing market to recover. First seen last December, the review said it would place new rules around mortgage advice and income will have to be verified in every application. Lenders would also need to place a greater emphasis on all regular outgoings.
A spokesman for the panel said “We suggest a specific rule to ensure that consumers impacted by the transitional arrangements are not unfairly treated or discriminated against by reason of their inability to access alternative, more competitive mortgage products."
There are approximately 1.5 million interest-only mortgages worth around £120 billion which are due for repayment in the next decade, any new interest only products would not be available to those purely hoping that property prices will increase in the future.
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