MMR proposals suggest the affordability calculation should include any outstanding debts as liabilities, even if borrowers roll them into the mortgage, because these borrowers pose a higher credit risk.
Paul Shearman, mortgage, protection and GI proposition director at Openwork asked how much further this would compress a market where so many borrowers, particularly interest-only or self-cert borrowers are already stuck.
“We haven’t seen the rules yet and the latest paper showed clear evidence the FSA has listened to industry concerns and moved to reflect them, just as the industry has gone a long way to address the problems of 2006/7, which is a positive thing,” he said.
“The core of the MMR is that mortgages are an important financial transaction and advisers need to be in the position to give consumers the tools, knowledge and offer the expertise to be able to secure the right product.”
Lenders and trade body the CML have launched a fight back in their own responses to the mandatory advice proposal in the last consultation document.
Shearman said he would be “surprised and disappointed” if the regulator backed down from its bold but clear position.
Openwork’s warning follows the warning one in three interest-only mortgage holders could see their repayments double when new FSA regulations come into force next summer.
The Debt Advisor, managing director, Bev Budsworth said: “During the housing boom, interest-only mortgages accounted for a third of the entire mortgage market. Nowadays, it’s estimated that there are £120 bn of these mortgages that mature in the next 10 years where many householders have no other way to settle the capital other than to sell their home.”
