§ 25. Dr. IddonTo ask the Secretary of State for Trade and Industry if he will ask the Office of Fair Trading to take steps to abolish the Rule of 78 for redemption of all existing mortgages. [159088]
§ Dr. HowellsUnder the Consumer Credit (Rebate on Early Settlement) Regulations 1983, lenders can use the Rule of 78 to calculate early redemption terms for some types of loan. The Government agree that these regulations do not always give a fair and equitable outcome for consumers, particularly in respect of high-value, long-term loans such as mortgages.
We plan to bring forward proposals to replace the current settlement formula with one that will give a fairer outcome. We also want to improve the information consumers get about redemption terms, so they can take this into account when they decide which loan is the best deal.