Lenders calling for ban on interest-only mortgaging

Published: 28/05/2012

A number of lenders are calling for an outright ban on interest-only lending as part of the Mortgage Market Review (MMR), the Financial Services Authority (FSA) has revealed.

After publishing its final MMR paper in December, the FSA has confirmed some feedback it has received from lenders on the final proposals has called for interest-only loans to be banned.

Yet despite these submissions, the FSA has concluded not to impose such a ban.

Speaking at the Mortgage Business Expo in Manchester on Wednesday, Lynda Blackwell is the Mortgage Policy Manager at the FSA:

“Some people want us to ban interest-only and that includes lenders – some lenders have asked us to ban interest-only. We have listened to all the different views and what we accept is that interest-only is right for certain borrowers.”

The announcements has been met warmly by many in the industry who have been somewhat confused by lenders’ calls, suggesting should a lender no longer have a need to offer interest-only it should simply remove the product from its range as the Co-operative Bank has.

Interest-only lending has been severely constricted in recent months with many lenders capping their maximum loan-to-value for this product at 50 per cent.

Content correct at time of publication