With regard to the negative responses from brokers to the Financial Services Authority’s speech at the Council of Mortgage Lenders’ conference when it said it has not banned interest-only mortgages, what exactly is everyone railing against?
The regulator only wants to stop interest-only mortgages being used as tools to cheapen housing affordability, as opposed to sophisticated wealthy clients looking to manage longer term cash flows and tax liabilities.
A maximum mortgage of £500,000 is a decent cut-off to distinguish between these two scenarios, while a 25% deposit protects the banks against falling house prices. The other way to distinguish between the two is to make sure it can be afforded on a repayment basis.
Annual checks by lenders that other arrangements are in place to pay off the mortgage at the end of the term which do not include sale of property or inheritance, nips potential problems in the bud.
It seems to me that many in the industry do not mind the UK wasting billions in bank bailouts leading to higher taxes and reduced services as long as they can maintain their revenues.
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