FSA will not ban interest only

Nia Williams

March 22, 2011

The comments came in the FSA’s business plan, published today, setting out its priorities for 2011/12, and the implications for the FSA’s budget.

Commenting on the MMR, the FSA’s business plan says: “In respect of the MMR, in 2011, the FSA will continue to consult and analyse the impact of its proposals. In the summer the FSA will publish an indicative cost benefit and impact analysis of a full package of proposed rules, and follow this up with its final package of rule changes in early 2012. In reaching its conclusions, the FSA will seek the right balance between protection for consumers, sustainability of the market and consumer choice.

“The FSA is particularly conscious of the need not to take a “one size fits all” approach and the importance of balancing the advantages of simplicity against those of flexibility. For example, the FSA acknowledges that its initial proposal to have a fixed 25 year term for assessing affordability, whilst easy to administer, may not be appropriate given the range of different individual circumstances.

“The FSA nevertheless remains focused on ensuring that the new regime includes a robust assessment by the lender of the affordability of the loan for the individual, both for interest only and repayment loans. It is not the FSA’s intention to ban interest only loans which undoubtedly for some consumers represent an appropriate method of finance.”

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