The Financial Conduct Authority (FCA) has stated that there will be no further investigation into whether interest-only mortgages were widely mis-sold in the UK.
The FCA have concluded that the vast majority of borrowers with interest-only mortgage deals understood exactly what they were taking on, diminishing the chance of lenders facing mass claims for mis-selling mortgages.
Martin Wheatley, Chief Executive of the Financial Conduct Authority (FCA) responded to an enquiry from the Treasury Select Committee, saying: “The vast majority of customers understood the mortgage product they were sold and understand the need to repay the mortgage balance and have plans, albeit in some circumstances imperfect, on how to repay”.
The Financial Conduct Authority conducted extensive research in May this year after it was feared that up to 1.3 million customers did not have enough cash to repay their interest-only mortgage loans back and issued a wake-up call to all UK interest-only mortgage holders .
The FCA research also found that 2.5% of borrowers with interest-only mortgages said they were not aware when they took out the mortgage deal that they needed a plan in place to repay the whole amount borrowed, not just the interest, and still had no strategy in place.
Treasury Select Committee Chairman, Andrew Tyrie, wrote to the FCA to ask if there were any signs of mortgage mis-selling, in response Mr Wheatley said: “We have no evidence to suggest that these customers are concentrated in certain institutions, regions or demographic profiles. Should the FCA receive such evidence, then it would act on it but we are not currently planning further work into historic sales practices”.
However, the FCA has accepted that it is impossible to rule out some instances of poor practice and urged those who believe they have a case for mortgage mis-selling to contact their mortgage lender in the first instance and then contact the Financial Ombudsman Service.
The chief financial ombudsman, Natalie Ceeney, also believes that it is unlikely to see widespread legitimate claims for the mis-selling of interest-only mortgages, stating “Most people who bought an interest-only mortgage knew what it was. We have a problem, but it’s not a mis-selling problem.”
The research followed TV advert campaigns by no-win, no-fee legal firms offering to win compensation on mis-sold interest-only mortgages for borrowers.
Over 2.6 million interest-only mortgages are due for repayment over the next 30 years and the FCA has tried to raise consumer awareness amid fears that up to half of current mortgage borrowers will not have enough cash to pay back the loan in full when the deal comes to an end.
The FCA told borrowers that they should be prepared to communicate fully with their mortgage lenders and not bury their head in the sand, even if some borrowers had to sell their home to pay back the mortgage loan in full, especially if they did not take any earlier action to take control of their repayment planning.
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