Which? sceptical over move to affordability based lending

Despite revealing that the mortgage sector had been an area in which much positive progress had been made, Which? indicated that worries remained over the areas of associated fees and charges and the move by lenders towards an affordability based style of lending.

Speaking at the Building Societies Association’s (BSA) annual lecture, Peter Vicary-Smith, chief executive of Which?, admitted the focus on lowering product rates had resulted in an increase in associated fees. He said: “There has been considerable disquiet about the steep rises that we have seen in mortgage exit fees.”

However, he argued that the Financial Services Authority (FSA) could not base its regulation model solely on price. He added: “In the financial services sector there are a lot of barriers affecting moving money around. It is very difficult to see the FSA looking at prices, and it has stated that it is not a price regulator. Instead the more competition we have in the market will help drive out bad practices.”

In a speech at the Gleneagles summit, Callum McCarthy, chairman at the FSA, admitted the business model adopted by some organisations in the industry needed to evolve. “We have at present a business model which is based on incentives which produce results which are unattractive to reputable providers, unattractive to their customers, and whose benefits to intermediaries are questionable.”

Alan Lakey, senior partner at Highclere Financial Services, said: “The more products and choice available to borrowers the better. If lenders do decide to drop the fees associated with their products then that would probably mean the rates would go up, so there has to be a degree of balance.”