FSA clamps down following mis-sold sub-prime mortgages
November 25, 2007 by admin
Filed under News, News-Mortgages
The UK’s financial regulator, the Financial Services Authority, has come down hard on a handful of brokers that have been found to be mis-selling sub-prime mortgages in an already volatile financial market.
Chaos has resulted from a credit crunch that was sparked in the sub-prime mortgage sector of the United States. In fact, of the three brokers that have felt the wrath of the Financial Services Authority over this issue, one has been closed down altogether whilst the other two have been fined.
The three small brokers include Homebuyer Securities, which was closed down as a result of mis-selling sub-prime mortgages, the Loan Company, and Next Generation Mortgages. The latter two were fined by the FSA but remain in operation.
According to FSA officials the firms had been offering inadequate sales and advice procedures, and as a result of this had put their customers at risk. The companies were all found to be mis-selling sub-prime mortgages, which are mortgages that are targeted towards those with poor credit and those that are unable to prove a regular income.
An official from the Financial Services Authority stated: “Firms who do not comply with FSA standards taint the entire mortgage industry which is totally unacceptable. Any firms who place their customers at risk of receiving unsuitable advice through inadequate business processes can expect strong action from the FSA.”
According to a recent report a fine of £31,500 was imposed on the Loan Company, which was found to be offering inconsistent information and providing mortgage loans without checking that the borrower could afford to make repayments.
A further fine of £10,500 was imposed on Next Generation Mortgages, which was accused of failing to assess customers’ needs properly and failing to provide warnings about the risks associated with its mortgages.
Alan Wright
25th November 2007
Supermarkets branch out to car insurance
September 20, 2007 by admin
Filed under News, News-Insurance
Over recent years supermarket giants in the UK have branched out enormously and in addition to offering groceries and household goods many have also been offering a wide range of financial products, such as loans, credit cards, insurance products and even banking facilities.
According to a recent report, Tesco has now gone a step further and has launched a price comparison website for those looking for deals on car insurance in the UK.
There are already a rising number of price comparison websites in operation for car insurance, and Tesco will be joining this long line of comparison sites with its news venture Tesco Compare.com, which has been launched in conjunction with the Royal Bank of Scotland. The site will be launched in mid-September, but consumers should be aware that there will be a limited number of insurance companies that are used in the comparison, which totals around twenty in all.
As has been the trend in other sectors, this move by Tesco could result in other supermarket giants also setting up similar sites, which means that the huge number of price comparison sites could balloon even further in the near future. As with other price comparison sites customers will be able to enter their details into the Tesco website in order to search for the best deal on car insurance, but this will be from between the companies listed by Tesco.
Amongst the insurance companies that will be listed are some RBS ones, including Churchill, and consumers are reminded that because of the limited number of insurance companies that will be listed there could be better deals available from other insurance companies that are not listed on the Tesco site.
Tom Smith
20th September 2007
Risk of default increased by lack of checks
September 13, 2007 by admin
Filed under News, News-Mortgages
According to a recent report released by the UK’s financial regulatory body the risk of homeowners defaulting on their mortgage repayments has been increased as a result of various lenders allowing them to borrow money to purchase a home without carrying out adequate checks into their income.
The Financial Services Authority claims that some lenders have been allowing consumers to borrow money to buy property but have failed to determine whether they can actually afford the repayments based on their income.
With a series of five interest rate rises already having taken place in the past year, along with the threat of further rises, many homeowners with variable rate mortgages are struggling to keep up with repayments, even though they may have been able to comfortably afford the repayments when they took out the loan. However, for those that were struggling initially, as a result of being able to borrow more money than they could actually afford, the interest rate rises could tip them over the edge.
The FSA has been investigating the sub-prime market, where brokers and lenders seem to be unable to show whether the borrower can actually afford to make repayments on the amount that they borrow. According to reports around one third of brokers have been unable to confirm whether a borrower could actually afford the mortgage, and over half of them allowed borrowers to self certify their income.
One MP stated: “Talking about a few rogue brokers is just skimming the surface of the problem. While rogue brokers are a problem, the more pressing issue is high street lenders aggressively trying to build market share. Lending income multiples for mortgages are now at an all-time high and, with interest rates set to rise further, the outlook for many homeowners looks grim.
Tom Smith
13th September 2007
