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Regulator says it is powerless to defuse interest-only time bomb

The Financial Services Authority has admitted that lenders are sitting on an interest-only time bomb, but says it is unable to prevent it from exploding.

Giving evidence to the Treasury Select Committee last week on the Mortgage Market Review, the regulator claimed there is nothing it can do to help the large number of borrowers in their late 50s who have no repayment vehicle in place for their interest-only mortgage.

At the hearing TSC member Michael Fallon questioned Martin Wheatley, managing director of the conduct business unit at the FSA, on why the regulator was being so complacent about the time bomb and why it was just going to let it go off.

Wheatley admitted: “There is a ticking time bomb that has been created over the last 20 years and what we are trying to do is make sure that it does not get any worse.”

Fallon responded by saying: “But you are not defusing the bomb, you are making rules for new borrowers but not tackling what I think is going to be quite a serious problem for a lot of people in their late 50s who are not going to be able to pay their mortgage.”

Wheatley claimed regulations could not solve all the ills of the last 20 years, but they can ensure new mortgages are taken out with reasonable measures in place.
But he added that the MMR includes proposals to allow some borrowers to move home or remortgage without passing the current stringent checks.


Cambridge and Saffron lending up

Cambridge Building Society has reported gross mortgage lending of £144.5m for 2011 – a 13% increase on 2010. Its 2011 results also reveal a pre-tax profit of £600,000, down from £1m in 2010. The society’s mortgage balances were up 8% on the previous year at £55.7m, while its savings balances increased by 7% at £940,999. […]


Almost nine in 10 employers admit failings with post-DRA compliance

The default retirement age (DRA) was abolished more than three years ago, yet new research from Jelf Employee Benefits suggests that the vast majority of employers still have some way to go to fully understand, comply and communicate the landmark legislation change that prevents older employees being forcibly retired on the grounds of age alone.


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