Speaking at the BSA conference in Manchester today, Peter Williams, director Cambridge centre for housing and planning research said: “I understand the FSA’s stance that just assuming that you can trade a house as a way of solving payback is highly vulnerable in a world that is much less certain. It doesn’t look like a sensible strategy for lenders.
“The FSA is right to question the reliance on the sale of property to repay interest-only,” he said.
Jon Pain, UK head of financial services risk consulting at KPMG added: “I do think that the industry including government and providers, has got to think about the market in more fundamental way. There’s no doubt that interest-only was a key part of the mortgage market for a long period of time, but we need to get some more innovative aspects to the mortgage market.”
On the government’s reinvigorated Right to Buy scheme, Williams insists that while appetite was initially there just before the launch, he expects that to “run out of steam quickly.”
He said: “When it was first launched, Right to Buy was a shining example of policy intervention that worked. However, the [demographic] of council tenants has changed quite significantly. The people that have left have been replaced by people that are typically much poorer. The stock has changed. A lot of houses have been sold, but not as many flats. The stock that is left is less attractive for lenders, so I don’t expect this scheme to take off.”
He added the RTB policy “was driven from political commitment” or ideal, because he doesn’t believe government holds a view on Right to Buy as a form of property tenure.
