Decisions on interest-only should be made by brokers


I read with interest the letter in the May 30 edition of Mortgage Strategy, entitled ’Consumers should make interest-only decision, not FSA’.

The letter argued that there were dozens of good reasons for clients taking out an interest-only mortgage with or without a repayment plan as
long as the implications have been explained to them.

It went on to say that consumers should be allowed to make their own decisions about how they manage their affairs.

I would go further and suggest that brokers should make the decision not the regulator.

Imagine the scenario where a client sells their house and has an interest-only mortgage with Halifax on a fixed rate with 18 months left and a penalty of £1,500.

The client wants to move house and exercise the portability option on their mortgage to avoid the early repayment charge. If they happen to be in their early 60s and only have two or three years to work, would they be expected to switch to repayment or to another lender that will accept interest-only and pay the penalty?

The ridiculous thing is that once they retire Halifax will accept them on interest-only, if they have enough retirement income, by putting them on its retirement home plan. I know what the best advice is here, but it appears that the FSA and Halifax will stop me from giving it. What a
strange market we are in.