The Financial Services Authority (FSA) has confirmed that lenders do not appear to be incorrectly selling sub-prime mortgages (a more expensive mortgage targeted at people with a credit impaired history) to prime customers.

However, all lenders should review and possibly tighten their responsible lending policies, and ensure they are applied consistently in practice. To help borrowers, the Council of Mortgage Lenders (CML) has produced a new consumer factsheet that can be used to highlight the main things to consider when taking out a sub-prime mortgage. This is available on the CML’s website.

In addition, the CML is currently working towards establishing standard definitions for the various categories of adverse credit lending to make it easier for lenders to benchmark the performance of different categories of business.
Michael Coogan, CML director general, said: “The sub-prime market has an important role to play in helping people with past credit problems to rehabilitate their finances. But we acknowledge that, in particular, lenders and intermediaries in the sub-prime sector need to demonstrate that they are complying fully with the FSAs responsible lending requirements. We will be considering how best we can help lenders to do this.”