The Financial Services Authority (FSA) has banned fast track mortgages in order to make mortgage lending a more responsible transaction.
FSA is pushing for rigorous assessments for potential borrowers and this would include income verifications and thereby banning all fast track mortgage products.
However, this move has not been well received by Ray Boulger, senior technical manager at John Charcol.
He raised concerns that the FSA's decision had not been though through and was "completely illogical".
Mr Boulger's doubts stem from the fact that fast track mortgage products perform better than other deals and exhibit a better rate of house repossessions.
He said: "Their argument for banning self cert [mortgages] is that there is a higher risk of default and that is true, but to then ban fast track despite the fact that they perform better seems completely illogical. I think there is no justification for that at all."
These new rules will also have another negative repercussion in the form of increased administration fees, which will have to be borne by the client, he added.
According to the proposals put forth by the FSA, customers with bad credit history will be liable to greater protection in order to ensure they are covered for their vulnerabilities.
The news follows from recent statistics published by Defaqto which revealed that mortgage products offering discounted rates were on the way out. The research showed that these mortgages have shrunk by 72 per cent in the past three years.
In comparison, fixed rate mortgage schemes had increased by 33 per cent, whereas, mortgages that are based on trackers saw a growth of 36 per cent in the same time span.
Commenting on the trend, Catherine Hearnden, director of MyMortgageDirect, said: "I think discounted rate mortgages are a little bit vague anyway because no-one really knows what it is going to be discounted from. I think [the reduction in discounted rate mortgages] is a good thing." |
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