CML argues with FSA over interest only mortgage loans
September 9, 2010
It was recently announced that the Financial Services Authority was planning to limit the availability of interest only mortgage loans in the UK, which are classed as riskier mortgage loans than the more traditional capital and repayment loans. With interest only mortgage loans the borrower makes repayments on the interest on the loan over the mortgage term, which means that at the end of the mortgage term the principle loan balance is still outstanding.
However, the Council of Mortgage Lenders has now argued that it would not be in the best interests of consumers for the availability of interest only mortgage loans to be limited in this way. The CML has said that lenders have become more cautious about taking risks, and as a result the number of interest only mortgage loans had shrunk. The group said that within the last year almost 75 percent of mortgage loans had been repayment mortgage loans.
The principle loan balance on an interest only mortgage has to be paid at the end of the mortgage period, and to do this borrowers are advised to set up a sideline investment to raise the money to clear the mortgage loan at the end of the term. The CML said that there were now 8 percent of interest only mortgages that had a specified repayment vehicle in place, and 14 percent that did not have one in place.
The CML has argued that interest only mortgages are popular with many borrowers, and this included capable borrowers who would have investments to repay the mortgage loan at the end of the term, buy to let borrowers who would repay the loan through the sale of the property, older people whose borrowing would be settled after they died, and younger people who wanted to get onto the property ladder without overstretching themselves financially.
- Interest rates on personal loans have been rocketing According to a recent report the interest rates on personal loans in the UK have been rocketing over recent months, with consumers now having to pay significantly more for some loans than they would have
- Workers becoming more reliant on payday loans According to a recent report workers are becoming more and more reliant on payday loans to get them through the month, with many finding it difficult to make their finances stretch far enough without turning
- Rise in loan costs due to PPI crackdown According to a recent report the ongoing crackdown in relation to Payment Protection Insurance, or PPI, on loans has resulted in an increase in costs and interest rates for those taking out personal loans. Officials
- Secured Loans For Homeowners UK loan products fall into two categories: unsecured loans and secured loans. Secured loans are secured on your property which provides security for the lender and some benefits for the borrower. In order to qualify
- Business Loans Overview Whether you are starting up a new business or you already have a business, the likelihood is that at some point you are going to find yourself in need of some sort of business loan.
Comments
Got something to say?