Sunday, 01 March 2015

Charities back tougher mortgage regulation

Housing charities have written to the government urging it to back tighter regulation of the mortgage market.

Shelter and Citizens Advice have sent a joint letter to housing minister Grant Shapps supporting Financial Services Authority proposals to make lenders more accountable for ensuring borrowers can repay their debts.

Other housing bodies – including the Chartered Institute of Housing and the National Housing Federation – have complained the proposed new rules will prevent thousands of first-time buyers getting on the housing ladder, and damage the shared ownership market.

They have signed a separate letter to the chancellor warning of ‘dire consequences’ if the plans go ahead.

But Shelter and Citizens Advice are backing the proposals. Kay Boycott, director of campaigns, policy and communications at Shelter, said: ‘From our research we know that millions of people are already struggling with their mortgage payments.

‘We urge the government to support the FSA’s proposals to ensure we prevent even more people from living on a knife edge.’

Citizens Advice chief executive Gillian Guy added: ‘These proposals are about the FSA ensuring that mortgage lenders and borrowers take proper care to consider whether a mortgage is affordable and sustainable over time before entering in it.’

Readers' comments (11)

  • Is this for real - has anyone in Shelter or the CAB been to try and get a mortgage recently??????

    Out of touch or what

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  • Arthur Brown

    Given our current economic circumstances, anything that encourages prudent lending & sustainable borrowing surely deserves support. There is no point encouraging people into home ownership if they can't meet the repayments.

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  • Lee Page

    Anon 9:11

    I'm sure they have but, more to the point, they are the organisations who see first hand the effect of the irresponsible lending by the financial institutions which lead people into more and more debt which, ultimately, they can't repay.

    It makes absolute sense to put tighter controls in place albeit a little after the horse has bolted. If people are able to borrow less then that will have a downward effect on house prices, which is also a good thing, particularly in London and the South East where it is almost impossible to afford the inflated prices.

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  • Matt - the horse has well and truly bolted - they need to ensure their comments relate to the present reality.

    First time buyers need to be able to purchase without having to find £30,000. If the first time buyers cant get on the housing ladder then the market stalls and social housing becomes even more burdoned.

    In terms of debt - CAB and Shelter would be better commenting on fuel poverty, credit card interest rates and bank charges.

    Keep it current - they just look severely out of touch and behind the curve, big time.

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  • Chris Webb

    Out of touch allegations against the charities that have taken this action are unfounded. Yes, to the media led this issue may be past, but to those capable of touching thumb to finger tip it is clear that the government can easily allow the light self-regulations to be reduced, risking massive financial risk to the poor and sub-prime workers.

    Clear and firm regulation is required, real regulation not the platitudes of Osborne nor the bluster of Cable. Both have called for greater responsibility from the financial sector, but neither have taken action with the power they posses to do so.

    So yes, this call from the charities is correct and timely. I hope it adds to the calls for the government to prevent any reverse to the poor banking practices that have damaged economies across the world.

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  • Anonymous – I’m not sure whether you’re a mortgage broker or other benefactor of irresponsible lending. A deposit of 5% -10% is reasonable and responsible. If 5% deposit equates to £30k (i.e. full price of £600k) or 10% (i.e. full price of £300k) then may be isn’t for first time buyer.

    Both Shelter and CAB are in better positions than CIH and NHF to advice the government. The Credit Card debt/interest advice you accredited to CAB has been used by borrowers to pay their mortgage.

    It may appear to me that if you’re not a benefactor of the irresponsible lending then you completely out of touch or failed to digest the route cause of mortgage debt burden.

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  • I think tighter regulation is tacking the symptom not the cause. Mortgage lenders have adapted to increasing house prices by
    lending at salary multiples that mean that in hard times the borrower simply can't pay.
    The problem that needs to be tackled is the house prices and the only possible answer must be to either reduce demand (build more social housing) or increase supply ( build more properties to buy) BUT that needs to take place on a par with postwar building and at prices that are more reflective of traditional borrowing levels of say 3x salary.

    Unfortunately, we have a suitation where people ( myself included) are trapped in negative equity and couldn't sell at the price they need to pay back the mortage and without the movement at the bottom of the market, the first time buyer is locked out alltogether, whilst those struggling to pay are crying out for help.

    It's all very well shelter and CAB, both of whom are very laudable charities, writing to the government abour regulation, but thay won't actually solve the problem of demand so far outstretching supply

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  • I do think the closing the gate after the hose has a paradox lost on many journalists and this story is no different. If people want to focus the mind look at what RICS are saying on “distressed property” that’s repossessions to us in the trade. It seems this repos are growing in many countries and could well bring down the entire market....banks not willing to lend large amounts of repo property in the that is a Story I cold write for Inside Housing....cost Nil

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  • It's becoming entirely predictable that the CIH is on the wrong side of the equation.

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  • Gavin Howells

    Seriously, Kay Boycott (Director of campaigns at Shelter)?

    As above though, this comes way too late. The economic bubble has burst - while banks are recapitalising and are sensibly (doing what they should have been doing before) not lending to everyone who filled in a mortgage application - the current climate needs stability, not shoving the brakes on.

    The brakes needed to be applied 3 years ago when it was evident that credit was too cheap and was artificially inflating prices. Interest rates were way, way too low then and this was the instrument to stop spiralling prices.

    Too late. Way too late.

    This will smother the patient who is currently on life-support.

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