FSA may cap LTVs for borrowers with a history of credit problems
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The Financial Services Authority is to release its long-awaited paper on responsible lending on Tuesday, with predictions the regulator could limit LTVs for the credit-impaired.
The paper, which is part of the FSA’s Mortgage Market Review, will reveal the regulator’s thoughts on affordability and what it has planned for interest-only.
Lesley Titcomb, chief operating officer at the FSA, has already said that it is looking at the potential pitfalls of interest-only, and hinted strongly at a ban on certain types of product combinations.
Robert Sinclair, director of the Association of Mortgage Intermediaries, says proposals in the FSA’s paper will be lender-focussed.
He says: “I expect this paper to address the issue of toxic products. Europe is already looking to ban some high LTV or toxic deals. I don’t think we’ll see an outright ban on individual products but I expect some restrictions on LTVs for those who have had payment difficulties in the past.”
Sinclair also expects the regulator to shift responsibility for affordability to lenders.
Paul Broadhead, head of mortgages at the Building Societies Association, expects to see income verification introduced for all mort-gages, as outlined in the FSA’s earlier discussion paper.
He says: “At the peak of the market about 45% of deals were self-certified but we have seen high arrears rates and repossessions across the board, which shows that self-cert alone is not to blame for rising repossessions.”
He also has concerns about what changes the regulator will make to interest-only.
He adds: “Recent market developments have grabbed the FSA’s attention but I don’t see higher arrears on interest-only loans than on capital interest mortgages.
“It must make clear what it perceives the problem to be, what it thinks needs fixing and how it’s going to do it.”
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