FSA admits affordability worries

Speaking at the London Business Expo, Clive Briault, managing director retail markets at the FSA, said its thematic work, due for release next year, showed in many cases affordability was not being addressed at all.

He also admitted many brokers weren’t taking into account if the mortgage carried into the client’s retirement, which he claimed was ‘simply not acceptable’.

Briault said: “It is too early in the project to confirm numbers but it is becoming clear affordability is not being adequately discussed and assessed in an unacceptable number of firms. Indeed, in a worrying number of cases, affordability is not being discussed with customers at all.”

Briault also said the FSA was still not happy with the quality of advice being given on interest-only mortgages.

According to thematic work due to be published before the end of the year, more than three-quarters of cases which the FSA looked at didn’t have a clear repayment vehicle in place.

Briault admitted the FSA was now carrying out further research to see if consumers understood the implications of not taking out a repayment mortgage and whether the advice given was appropriate.

Stephen Atkins, group company director at Freedom Finance, concurred with Briault: “I’ve been on record for ages that if interest rates rise and people get into difficulty, they will go to their lawyer and the first thing they will ask them is did your broker talk to you about affordability. Due to low interest rates, brokers have been getting away with it but it won’t take much to push many consumers the wrong way.

“When the FSA warns about things like this, it’s not just protecting consumers but saying to brokers to protect themselves. If brokers place emphasis on treating customers fairly, then they are not just protecting the customer but also themselves from any problems down the line.”