CALL FOR RELAXATION OF MORTGAGE AFFORDABILITY RULES

Many in the UK property industry are calling for a relaxation of mortgage affordability rules to help more lifetime mortgage customers take up the option to make interest repayments initially before switching to a roll-up arrangement.

The move could benefit consumers and encourage innovation, according to the Equity Release Council which has asked the Financial Conduct Authority to look into it.
Amendments to the Mortgage Conduct of Business rules following the Mortgage Market Review mean that lifetime mortgage contracts which permit, but do not require, consumers to pay interest for a period are subject to the requirement of providers to assess their affordability. This is despite the fact that payments of interest are always optional and that customers will never be at risk of losing their home as a result of being unable to continue with interest payments.

As a result, some customers who would have taken out a lifetime mortgage giving them the option to repay interest for as long as they wished might not now pass affordability assessments, may be reluctant to subject themselves to the assessment process or be recommended alternative products.

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