FSA should let lenders enter sub-prime sector

I feel compelled to write in response to the news item in last week’s issue of Mortgage Strategy headlined ’CML ponders cutting repossessions for 2010 to less than 53,000’.

The subject of repossessions is one that I have recently brought up with my local MP.

It doesn’t take a rocket scientist to figure out that repossessions are set to rise in the near future and in my opinion this can be put down to one major factor.

Most sub-prime borrowers are currently enjoying low reversionary interest rates and frankly, if these people are paying less for their mortgages
most are likely to be spending the surplus rather than paying off their mortgages.

When interest rates start to rise – whether Bank of England base rate or those linked to LIBOR – sub-prime borrowers will be worst affected

It’s clear that when interest rates – whether Bank of England base rate or LIBOR-linked – start to rise they will be worst affected.

The Financial Services Authority is stalling on letting new lenders into the market and I suspect most of those under scrutiny plan to operate in the sub-prime sector. They obviously recognise that this is a growth area.

There has been little on the market to facilitate these clients’ needs for more than two years and if the FSA and the government do nothing to fill this gap there could be dire consequences.

For the sake of the market I hope new lenders are let in at the earliest possible opportunity.