The CML suggests alternative to killing of interest only

The Council of Mortgage Lenders (CML) have put forward some suggestions in response to the Financial Services Authorities consultation paper on interest only mortgages, in which they suggest alternatives to killing off interest only. Interest only mortgages have been the hot topic of conversation as mortgage lenders continue to tighten the terms they issue these mortgages on. The concern is that the FSA will ban interest only mortgages and make it even harder to people to get on the property ladder. The key points are: The borrower should retain responsibility for repaying the capital at the end of the term. The lender will seek to re-validate the existence of a repayment method 10 years before retirement age. If the borrower does not have a repayment method in place, the lender will agree appropriate remedial action, taking in to account the affordability of the revised monthly payment. In the annual mortgage statement the lender will remind the borrower of their responsibility to repay the capital at the end of the term and in particular, the need to maintain their repayment method. There are an estimated 3.75 million first-charge mortgages, with around £470 billion with at least some interest-only component. The Skipton Building Society have become the latest lender to restrict interest only lending. Their lending policy now states that all loans over 75% loan to value or more than £500,000 will now have to be taken on full capital repayment. October 3, 2010