AMI hits out at FSA for irrational interest-only stance
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The Association of Mortgage Intermediaries has criticised the Financial Services Authority for being irrational in its thinking towards interest-only mortgages.
It has replied to the FSA’s consultation on interest-only mortgages and says the regulator has failed to address the root cause of the financial crisis.
Robert Sinclair, director, AMI, says: “Our credit crunch was driven by the closure of capital markets and the inappropriate risk assessment of securitised mortgages. It was the bad use of these mechanisms that led to the bank bailouts.
“If the FSA conducted a proper root cause analysis it would have led them to that answer and, therefore, different solutions to those proposed.”
He says the regulators apparent aversion to a type of borrowing that has served many consumers very well appears predetermined rather than driven by rationale.
Sinclair believes when interest-only mortgages are delivered on an advised basis and with a robust assessment of appropriateness for the customer, there is an appropriate place and use for them.
He says: “This is not an affordability issue on day one or subsequently. It is the appropriate use of a funding route which, with appropriate risk assessment, should leave individuals no worse off. We must ensure we do not sacrifice a good choice for many on the altar of perfection and certainty.”
He says regulation should not make it so difficult that lenders see interest-only as so risky that the capital required to cover this prices it out of the market.
AMI is also supporting the submissions on interest-only from the Council of Mortgage Lenders, Building Societies Association and the Intermediary Mortgage Lenders Association.
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Readers' comments (6)
Bob Bull | 5 Oct 2010 11:52 am
More and more the FSA is acting like a dictatorship, and trying to run the mortgage market rather than regulate the participants. Threatened by the Coalition it appears to be desperately trying to justify it's expensive,regime at the expense of consumer choice and free market decision making.
Expect even more and even bigger fines, for more and more 'transgressions' from their chosen path. Somjeone hand me an axe.
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Dave | 5 Oct 2010 1:13 pm
There is nothing wrong with Interest-only mortgages (or any of the other products the FSA wish to prohibit) in the right circumstances.
The FSA imagine there is abuse (or see one or two cases where individual advisers abuse) and they immediately want to ban everyone else from doing something that is actually still the most suitable solution in certain situations.
Clearly, if someone sells inappropriate products and/or gives poor advice then they should be removed from the industry (and that includes branch staff in banks).
For everyone else, we need to be able to demonstrate why our advice is appropriate and suitable and that should be the end of it.
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JohnDF | 5 Oct 2010 3:13 pm
Instead of DICTATING how the market should function and what products it should offer the FSA should look closer to home and concentrate on REGULATING the market. Oh forgot, it failed so everyone has to pay the price!!
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AP | 5 Oct 2010 7:15 pm
How many mortgage prisoners are there going to be as a result of this piece of folly. Millions. And the chance of your captor bank treating you competitively: Nil
Treating customers fairly?
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Phil Green | 6 Oct 2010 9:15 am
If only the FSA had a fraction of Mortgage experience that we have, they might actually gain some respect.
Absolutely nothing wrong with Interest Only mortgages - many homeowners could only get started this way especially when interest rates were high.
It should also be taken into account the average period of time of a typical mortgage and the amount of time an average property is owned.
Don't get me wrong, Capital & Repayment is the ideal solution for older borrowers or borrowers intending to stay in a property for more than 5 years plus.
It's really time for the FSA to work closer with the Mortgage Industry - they and us are likely to gain from it.
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Anonymous | 6 Oct 2010 10:50 am
I am not in favour of banning interest only mortgages but many people only took interest only because they could not afford the same mortgage on repayment. For Robert Sinclair to claim that affordability is not an issue is a little naive in my opinion...
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