Do you think interest only mortgages will continue to be made available?
The FSA has made it clear that it is not a fan of pure interest only products being selected for affordability reasons and it is hard to argue with that. There are some borrowers for whom interest only is suitable and this isn’t as simple as those with high annual remuneration or those living in London. It is more about the attitude and intent of a borrower. Do they have a clear and credible plan, or do they not? It would be wrong for interest-only to be outlawed, however it is only right for lenders to be more intrusive around intent to repay.
How will this kind of product develop in future?
The general feedback we are getting for the bigger players is that they will settle for the lower risk, lower LTV interest-only to continue. For certain types of borrowers, it may develop into a bit of a niche product, perhaps even with a premium on it.
If I was the FSA, what I wouldn’t want to see is people taking it for affordability reasons. As long as there is a convincing and credible repayment path in place, whatever that might be, there will always be a place for interest-only.
You’ve talked about the need for lenders to be more intrusive around intent to repay. How do you think this should be approached?
What that would involve is asking for policy numbers, providers’ names, insurers’ names and forms of substantial evidence. By the time the underwriting process is through, the lender would need to demonstrate that they’ve taken all steps to get comfortable with what the customer intends to do and it is well documented.
I think the jury is out in terms of whether initial underwriting is sufficient. There is a strong indication that more regular checks need to be in place along the way. Each lender will no doubt get comfortable with how often that is, be it every five years or so, but a regular contact strategy is essential.
What book are you currently reading?
The Big Short by Michael Lewis. It may sound boring but it’s quite good actually.
What’s the best piece of advice you’ve ever been given
If you say you are going to do something, then do it.
If you could invite three people to a party, then who and why?
Madonna, Barack Obama and the Pope.
If you could have a superpower, what would it be?
For every birthday you get, you automatically get two weeks in any year of your choosing from when you were younger. So that would mean when I turn 43, I would be allowed to have two weeks as a 20 year old again.