The FSA’s manager of mortgage policy said: “With funding so much thinner on the ground, it makes commercial sense for a lot of lenders to lend money on higher quality mortgages.”
She went to explain to reassure delegates that the regulator has no plans to ban interest-only mortgages.
“We told lenders to make an informed judgement when it comes to interest-only.
“We asked the market whether we should be prescriptive about the repayment vehicles allowed, but lenders told us no, that they needed to deal with that on a case by case basis. I would think that would provide brokers with an opportunity to find the product that meets customer’s and lender’s requirements.
“We also haven’t said that sale of property is banned either, we’re just saying that downsizing is a viable option.”
Blackwell told delegates some lenders told the FSA that they would like to see it ban interest-only mortgages altogether.
“The fact is interest-only is the right product for some consumers but it should not be mainstream.
“We’ve asked lenders to look at least once during the mortgage term to check that the consumer on interest-only is on track.”
In response to John Wriglesworth’s comments about pricing interest-only mortgages based on risk in an earlier session, Blackwell said that “prudentially it doesn’t matter.”
“Our stated objective is to ensure that consumers are protected. What the MMR wants to do is ensure we have a sustainable market where the large majority of borrowers can access mortgage credit, whilst eradicating the poor practices seen in the past.”
On transitional arrangements, Blackwell said: “We had loads of helpful suggestions on transitional arrangements from the industry. I think there is a concern that we may be too restrictive in not allowing borrowers to borrow more and allowing them to increase their payments. We need to think about this as we recognise that there are times where this may be a sensible thing to do, for example when a consumer wants to change to a fixed rate mortgage to ensure a greater degree of certainty of expenditure.”