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Mortgage lenders should face penalties for repossessing homes too quickly, MPs urged today.
The Commons communities and local government committee criticised the "precipitate" action being taken against the increasing number of people falling into arrears. It said in a report that attempts by the government to limit repossessions lacked "enforceability".
The committee welcomed measures to help secure mortgage holidays for people who lose their jobs in the credit crunch, and the introduction of a new protocol for those lenders considering action, but expressed concern that the government seemed "powerless to affect lender behaviour" and that guidelines from the Financial Services Authority (FSA) and the government's new "pre-action" protocol on repossession was "lacking enforceability".
The Council of Mortgage Lenders has predicted 75,000 repossessions during 2009 compared to 45,000 last year, while Citizens Advice has warned that some lenders are treating repossession as a first resort rather than last.
The cross-party committee said it had received "worrying reports of the precipitate behaviour of lenders when dealing with customers who have fallen into arrears with their mortgage payments, implying a lack of commitment to the principle of using repossession as the last resort."
It added: "We recommend that the government use the establishment of its new Lenders' Panel closely to monitor lenders' repossession behaviour. It should consider what sanctions should be imposed upon lenders if they fail to comply with FSA guidelines or the new pre-action protocol."
Adam Sampson, chief executive of housing charity Shelter, said: "We fully support the report's call for stronger regulation by the FSA of mortgage lenders to help protect thousands of vulnerable homeowners from needlessly losing their home through aggressive repossession."
Social house-building
The committee's report also raised concerns about funding for social house building in future years after £975m was brought forward from 2010/11, saying the construction target of 45,000 for that year was already inadequate, and that more money would have to be found even to achieve that. It recommended that a greater proportion of new homes ought to be stipulated as social housing.
The report backed the government's decision not to give up its housing targets – even though they are now unlikely to be met – as they still reflected demand. However, it acknowledged that this demand is also set to grow: "A greater proportion of the total number of households are now likely to need access to social housing as a result of current economic conditions."
Sampson said the report highlighted the "desperate need to invest in more social housing".
"As housebuilding dries up and thousands of construction workers face the dole queue, building the homes this country needs can not only help the thousands of people living in poor housing, it can also give a real and much needed financial boost to the economy," he said.
"Pressure is now growing from all sides for the government to spend billions of pounds in the next two years to build tens of thousands of new social homes, and for Gordon Brown to fulfil his promise to build 3m homes by 2020."
The housing minister, Margaret Beckett, said: "We are constantly looking at what more we can do to keep housing supply going in the current climate.
"That is why we are bringing forward spending and buying unsold homes, to deliver thousands more affordable homes sooner and help protect jobs in the construction industry. We have put in place the most comprehensive package ever to help families at risk of repossession."
Mortgage approvals
Meanwhile, figures published today by the British Bankers' Association showed a modest increase in the number of mortgage approvals in January, with 23,376 deals approved for house purchase compared with 22,416 in December. But the figure is still down 43.2% compared with the same month last year.
Gross mortgage lending fell by 45.2% in the 12 months to January 2009, with banks lending a total of £9.9bn, of which £2.9bn was for home purchases – a fall of 56.1% compared with the same month last year. Last week, the Council of Mortgage Lenders announced a 52% fall in gross lending over the same period.
Howard Archer, chief economist at IHS Global Insight, said: "The modest rise in mortgage approvals in January adds to the overall evidence that housing market activity may have bottomed out. Nevertheless, it is still at an extremely low level, which suggests that further significant falls in house prices are likely.
"Furthermore, while recent survey evidence indicates that buyer enquiries are now picking up significantly as people are attracted by lower house prices and the Bank of England slashing interest rates, we are sceptical this will lead to a marked rise in actual sales anytime soon."
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