Sale and rent back halted

The City watchdog has clamped down on the much-criticised sale and rent back industry, which preyed on struggling homeowners.

A damning report which was published by the Financial Services Authority this morning shows that most sale and rent back deals were either unaffordable or unsuitable and never should have been sold.

The regulator has now effectively shut the entire industry by referring one firm to its enforcement division and cancelling the permissions of others.

Nausicaa Delfas, the FSA's head of mortgage and general insurance supervision, said: "Sale and rent back is often the last resort for struggling homeowners, so we expected to see firms treating their customers much better than this report suggests.

"It seems most firms were more focussed on their own commercial success rather than the welfare of the customers, with one firm even resorting to fraud."

Sale and rent back companies targeted struggling homeowners with an offer to buy their home and then let them remain paying rent.

They sold the deals on the promise of helping people avoid becoming homeless.

But firms paid a pittance for properties and then sold them on for a fat profit leaving the leaseholders with no rights and at the mercy of new owners who often hiked up rents to unaffordable levels.