AMI: No evidence of systemic IOM mis-selling

Robyn Hall

May 2, 2013

However the FCA did find that 13% of interest-only customers did not realise that they would have to repay the capital on their loan.

The regulator also found that 1 in 10 interest-only mortgage holders do not have a repayment strategy in place.

A minority (24%) of these also said that they did not know at point of purchase that they needed a separate repayment plan. However this equates to just less than 2.5% of all Interest-only holders.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said: “In this substantial study of the issues surrounding the maturity of interest-only mortgages the FCA has not found evidence of systemic mis-selling in the residential interest-only market.

“It has found that the vast majority of consumers who took out these products understood the terms associated with the loan.

“However some customers will need support to ensure that they are able to appropriately manage the maturity of their interest-only mortgage.”

Sinclair said that lenders will need to be flexible in the way they consider affordability assessments to ensure that consumers can make the required adjustments to their mortgages.

Sinclair continued: “It may not be appropriate for consumers who are looking to move to a capital repayment loan, fully or in part, to be assessed through the current affordability models being employed by lenders.

“Many of these are set to limit new business flows and might not work in the consumer’s wider best interests. The MMR transition rules should be used to assist with this process once they come in to force.

“FCA clearly places the onus on the consumer to repay however lenders must provide support to assist customers who have maturity issues.

“Intermediaries may be the first point of contact for some customers but ultimately this is a lender issue.”

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