ROOF Blog

Around 300,000 people who had hoped to pay off their mortgage this year face shortfalls. They are all victims of missselling of 25 year with-profits endowment policies. Almost three million more people will suffer a similar fate in the next few years, according to the Association of British Insurers. At the peak of the 80s housing boom, homebuyers were encouraged to take interest-only mortgages and rely on investment returns from an endowment to repay the loan at the end of the term, usually 25 years. In the 90s, £50 a month policies regularly turned a £15,000 investment into a £100,000 return.  Today, they commonly pay out less than £30,000 for the same 25-year investment.

Fears of a double-dip recession and a sterling crisis in the run-up to the election were raised last night amid news of collapsing investment in British industry and a warning from one of the world’s leading financiers that the pound could plummet within weeks. The pound fell sharply on the foreign exchange markets after a day of grim economic news which saw an admission from RBS that it had missed government targets for business lending, a downgrading of the UK growth prospects by the European commission and a warning from the CBI that consumer spending was likely to remain weak ahead of polling day.

The Financial Services Authority (FSA) has called the buy-to-let market ‘unsustainable’, with high incidences of mortgage fraud and arrears a major reason for them to act as regulators.

If buy-to-let remained outside its remit, borrowers who were turned down for residential mortgages – which are already regulated and will be subject to tougher rules under the FSA’s proposals – may try to obtain unregulated buy-to-let loans instead; a process it called ‘gaming’.

The FSA said: ‘Bringing buy-to-let within regulation…would address an identified risk to market sustainability, strengthen oversight arrangements and offer the potential for protecting consumers making investment decisions on property’.

Extending the FSA’s scope to include buy-to-let mortgages would require approval from the Government.

The Governor of the Bank of England, Mervyn King has called for big banks to be broken up, in a speech to business leaders in Edinburgh. He suggested that ministers’ refusal to hive off the ‘casino’ investment arms from High Street banks could lead to a crisis ‘even worse than the one we have experienced’. And he warned that rapid increases in the national debt meant Britons would be paying to clear up the mess ‘for a generation’. His intervention came as official figures revealed public borrowing soared to a record £77.3 billion in the first six months of the financial year - the highest half-yearly figure since the Second World War.