Speaking at Sesame’s London symposium yesterday, Paul Howard, head of corporate accounts for Nationwide, and Kevin Purvey, head of intermediary at Lloyds-owned Cheltenham & Gloucester, said interest-only mortgages had a future despite indications from the Financial Services Authority that all mortgages could become repayment-based post MMR.
Howard said: “I hope we don’t talk ourselves out of interest-only because the market would be poorer for it. There are clearly some for whom interest-only is a very sensible way of funding their mortgage.”
Last week at Mortgage Business Expo Sheila Nicoll, director of conduct policy at the FSA, said the industry should submit their views on the future of interest-only mortgages to the regulator as part of the consultation for CP 10/16.
Howard added: “Maybe too many people have taken interest-only but I think it is a very viable and a very meaningful method of repaying the mortgage and I think [explaining] that should be part and parcel of the advice process.
“I see a bit of a consensus developing in the market – there have already been a number of adjustments to lenders’ requirements and criteria. I hope that we’ll reach a consensus that says this is the level where everyone is happy with interest-only, and that the FSA looks at that and is comfortable with that as well.”
This year several lenders have tightened criteria on interest-only mortgages in an apparent move to reduce this type of lending. Lloyds Banking Group was the first to retract, limiting interest-only lending to properties below £500,000.
But C&G’s Purvey said: “The market is still there for interest-only. I think what we’re saying is that people understand the information they should have. It’s also important to note that interest-only is still under consultation and it’s right and proper that we review and ensure that people have adequate means of repaying their mortgages.”
Howard added that lenders were taking an active role speaking to the FSA to get their views across.
He said: “Make no mistake the MMR will cost the lending industry a huge amount of money. And to make these changes, particularly in areas where we feel it ain’t broke, it could be recreating the world here. Without doubt there will be lobbying going on.”
