product choice
Interest-only mortgages to go?
T
he Intermediary Mortgage Lenders Association (IMLA) has warned that interest-only mortgages will become
effectively obsolete if the Financial Services Authority (FSA) proceeds with proposals contained in the Mortgage Market Review consultation paper. IMLA warns that the implementation of the FSA’s draft proposals will result in lenders withdrawing from this important sector of the market. In its response to the consultation, IMLA
argues that the FSA could make simple rule changes that will preserve the ability of lenders to judge interest-only applications on their individual merits rather than be tied by inflexible rules.
IMLA believes that the introduction of an enhanced affordability test and a requirement to assess the borrower’s capacity to service a capital and interest- only loan is sufficient to ensure more robust interest-only lending decisions. Executive director Peter Williams says,
“The FSA has set out to create a flexible market that works better for consumers. In IMLA’s view, its potential treatment of interest-only loans could achieve the very opposite, not least through the increased regulatory burdens and risks the regime will pose for lenders. “The FSA needs to find a balance in what
it proposes so that lenders are still able to offer interest-only loans and thus meet a diverse range of customer needs.” CML Director General Michael Coogan said, “Interest-only mortgages are an appropriate choice for a range of different types of consumers.” He believes it is possible to address the FSA’s concerns without imposing costs and requirements on lenders and borrowers that are likely to prove to be unacceptable.
home buying process Gazundering returns T
he amoral practice of gazundering has returned. Gazundering is worse than gazumping. It happens when a buyer
and seller agree a price for a property. The seller then sets in motion all the tortuous legal processes. But just before exchange, the buyer drops his offer, to ‘blackmail’ the seller. Neither practice is illegal in England and Wales because the law states that nothing is binding until contracts are exchanged. One factor that is causing the resurgence of gazundering is the difficulty buyers – especially first-timers – have in obtaining a mortgage. Figures from the Council of Mortgage Lenders indicate that gross mortgage lending fell 14 per cent to £11.4bn between July and August. Experts have warned sellers to assess how committed the buyer is and to insist on an early survey to speed up the exchange of contracts. What are your views – should it, or could it, be outlawed? Email the Editor,
Sheila@propertydrum.com.
PROPERTYdrum NOVEMBER 2010 33
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