Speaking to delegates at the BSA annual conference in Manchester, the CEO designate of the FCA explained how the interest-only market still requires much attention to solve problems over repayment vehicles.

“We’re in a transitional phase with interest-only. We can have an interest-only market but it has to be accompanied by the ability to validate a repayment strategy and the problems we’re trying to solve are two-fold.

“First, we have the problem of people who have effectively relied on an ever-rising housing market and the societal problems here are that people now have to sell homes to fund repayment.

“The second problem is more of a prudential concern as banks are having to operate significant forbearance strategies because they’re simply finding that people either can’t, won’t or don’t have the ability to pay.”

Wheatley added: “I wouldn’t say we’re where we need to be with interest-only, we are still in a transitional phase.”

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Wheatley also told delegates that urgent action is required to deal with claims management companies over mis-selling of payment protection insurance (PPI).

“Claims management companies found a niche in the market when some of the banks were a bit slow to pick up the baton. They’ve found a position and have become a nuisance. The problem we have is that they’re regulated by the Ministry of Justice (MoJ), and the difficulty that the MOJ is having is working out what the standards for those companies should be.”