Talking of interest-only … done it yet?


The FCA recently issued guidance to lenders and mortgage intermediaries about their treatment of interest-only customers.

The regulator has placed great emphasis on Principle 6, which relates to treating customers fairly, and the common response to Principle 6 from many in financial services is: “Well, I do that as
a matter of course.”

I am sure you do – but can you prove it? In the case of backbook and interest-only customers, this is what the FCA will want to see.

The regulator is asking lenders in particular but also intermediaries, to specifically address certain topics and explain how customers are protected.

Firms must have a written strategy spelling out how they provide guidance for staff, monitor procedures and interact with customers. This last point is crucial given that interest-only customers approaching the end of their mortgage term now or in the next few years could be in deep trouble.

A timely intervention several years ago, such as helping the borrower switch to a capital repayment product, would have headed this problem off at the pass.

The positive part of the latest regulatory missive is the fact that it mentions advisers and intermediaries specifically as a focus for presenting solutions.

Perhaps now is the time to revisit interest-only clients to check on their progress and outline available options should they wish to review their initial decision.

This will not just please the regulator but also constitutes sound business practice.