Tony Hazell  

Is the FCA changing the face of mortgages?

Tony Hazell

Tony Hazell

The FCA’s green light to retirement interest-only mortgages should bring relief and certainty to borrowers who have no clear means to repay their home loan.

This changes represents a full 180 degree pirouette by both the regulator and leading lenders.

The lending squeeze post-2008 saw older borrowers unfairly targeted as a reaction to frivolous non-status loans.

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In effect, people who had paid their mortgages without problem for a lifetime were punished for daft lending decisions made by hopeless managers who threw money at those who could never afford to borrow.

Many of those coming up to retirement will have taken a repayment vehicle at the time they took out their loan. Often this will have been sold to them by the lender or its representative.

But it has fallen short and the gap has not been plugged. There are arguments that some borrowers have failed to address a shortfall that they knew was coming.

But there are equally strong arguments that lenders and the financial advisers who sold the products did not do enough to alert their clients to the problem – especially in the early years of the endowment disaster.

Whatever the arguments, we are where we are – and a sensible solution was needed to make sure that people were not ejected from their homes while they could still afford interest payments. This, surely, is it.

By turning interest-only retirement lending into a mainstream enterprise the FCA has helped to trigger greater competition – and this should force down interest rates.

Equity release, with its extra costs, will no longer be the only option for those who need to continue borrowing into retirement.

Many of these borrowers will be very safe options. They often have a large amount of equity and a secure income from a pension.

Yes, there will be risks – the main ones being that the partner with the bigger pension dies or that care costs start to dig into the income of the borrowers.

But these risks are surely comparable with those faced by any lender who hands a mortgage to a young couple where one partner may stop or cut down on working or the cost of a growing family eats into the budget.

Be cautious with your data

I have been fascinated by the data sharing squabbles over Facebook. My reaction is: what did you expect? 

Facebook was worth $500bn (£351bn). Did you really think that this service was free and that no one had any interest in your data?

Many years ago I felt compelled to sign up when my older stepson went to university and my nephew went to Australia. Both enthused that it was a great way to stay in touch – though I never quite understood what was wrong with sending letters and using the telephone.