BSA fears over-burdensome regulation will stifle interest only mortgage market
The BSA has today responded to the FSA’s discussion paper on the potential changes in regulation of interest only mortgages, which could considerably restrict this market.
Commenting, Paul Broadhead, BSA Head of Mortgage Policy said: “Interest only mortgages are not in themselves inherently bad or high risk and the industry has been attentive about restricting their availability to suitable customers.
However, there is a real danger that the FSA could introduce over-burdensome regulation that will stifle this market and affect many existing borrowers – including many for whom this is a suitable option.”
The FSA suggests lenders take greater responsibility for validating repayment methods at the start of the mortgage term and periodically thereafter. Broadhead is concerned about such a move:
“Lenders have a responsibility to make clear to borrowers the risks of interest only mortgages and to stress the need for a repayment method, but the FSA should avoid creating a moral hazard where customers take less interest in the performance of their finances in the mistaken belief that lenders are doing it for them.
Shifting this responsibility to lenders will not help borrowers make well informed and rational decisions, nor will it deliver a flexible mortgage market that works better for consumers.”
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Notes to Editors
1. The embargoed response accompanies this press release.
2. The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 49 UK building societies. Mutual lenders and deposit takers have total assets of over £365 billion and, together with their subsidiaries, hold residential mortgages of almost £235 billion, 19% of the total outstanding in the UK. They hold more than £245 billion of retail deposits, accounting for 21% of all such deposits in the UK. Mutual deposit takers account for about 36% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.
3. Photographs of Paul Broadhead are available from the BSA press office, from the Association’s website at www.bsa.org.uk or Headlinemoney www.headlinemoney.co.uk
4. Contact
Fiona Cornes – 020 7520 5926 / Fiona.cornes@bsa.org.uk
Katie Errington
Policy and External Affairs Officer
Building Societies Association
6th Floor, York House
23 Kingsway
London
WC2B 6UJ
Tel: 020 7520 5904
Fax: 020 7240 5290
Email: katie.errington@bsa.org.uk
Web: www.bsa.org.uk
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