Tweet
More than 17,000 homeowners would have been saved from the nightmare of repossession if proposed cuts to reckless lending had been in place, Shelter reveals today.
The housing and homelessness charity is highlighting just how many people have had to pay the price for irresponsible lending over the years. Analysis of FSA data reveals over 17,000 repossessions would have been prevented if mortgage regulation rules, proposed by the Financial Services Authority (FSA) as part of the Mortgage Market Review, had been enforced over the last five years.
Under the rules vulnerable homeowners would not have been lent huge sums of money they were never going to be able to pay back, which in turn would have stopped them from falling into arrears in trying to keep up with sky-high monthly mortgage payments.
The analysis also shows borrowers wouldn’t have had to pay out over £20 million in arrears fees demanded by banks when they fell behind with their repayments.
On the day the FSA publish their latest repossession figures, the charity is calling on Government to support the FSA’s proposals which would introduce simple, common sense affordability and income tests to ensure borrowers can manage their repayments. The rules will not stop most people getting a mortgage but will ensure the size of the mortgage they get is affordable and they can pay it back.
Campbell Robb, chief executive of Shelter said: “This research shows just how much the mortgage market has failed to protect people, leading to thousands needlessly going through the nightmare of repossession.
“Every day our advice services help struggling homeowners pick up the pieces after being irresponsibly lent money they had no hope of paying back in the first place. Many people try desperately to manage the hefty mortgages repayments until one small thing, like an illness or a pay cut, pushes them into a spiral of debt and repossession.
“Reckless lending over the last few years, which saw some lenders giving out loans of more than 100 per cent of the value of the property and up to seven times people’s salaries, helped to fuel the rise in arrears and repossessions, not to mention an unsustainable house price bubble.
“And yet the banking industry still refuses to support the FSA’s proposals and make sure this reckless behaviour is never allowed to happen again.
Mr Robb continued: “With tough times ahead it is vital the Government and lenders make a genuine commitment to sensible lending which will prevent any more needless repossessions in the future.”
Notes to Editors:
1. Figures unless otherwise stated are based on data published in Annex 1 of Mortgage Market Review: Responsible Lending (FSA, 2010) available at http://www.fsa.gov.uk/pubs/cp/cp10_16.pdf
2. The number of repossessions that could have been prevented has been estimated using economic modelling. The model was used to estimate the impact of FSA responsible lending proposals would have had, had they been implemented over the period from Q2 2005 to Q1 2009.
3. The model included mortgage transactions data (Product Sales Data) from April 2005 to March 2009 that was matched to information about accounts that had been repossessed, had a possession order on place or were in arrears as at 1/8/2009 (collected by the Council of Mortgage Lenders).
4. For mortgages that were identified as unaffordable (using the criteria set out in Annex 1 of Mortgage Market Review: Responsible Lending), the model estimated that there would have been a reduction in the number of repossessions of between 16,900 and 18,500 over the period of analysis.
Source: Shelter Media Centre - 17,000 PEOPLE NEEDLESSLY LOST THEIR HOMES DUE TO RECKLESS LENDING, SHELTER REVEALS
The housing and homelessness charity is highlighting just how many people have had to pay the price for irresponsible lending over the years. Analysis of FSA data reveals over 17,000 repossessions would have been prevented if mortgage regulation rules, proposed by the Financial Services Authority (FSA) as part of the Mortgage Market Review, had been enforced over the last five years.
Under the rules vulnerable homeowners would not have been lent huge sums of money they were never going to be able to pay back, which in turn would have stopped them from falling into arrears in trying to keep up with sky-high monthly mortgage payments.
The analysis also shows borrowers wouldn’t have had to pay out over £20 million in arrears fees demanded by banks when they fell behind with their repayments.
On the day the FSA publish their latest repossession figures, the charity is calling on Government to support the FSA’s proposals which would introduce simple, common sense affordability and income tests to ensure borrowers can manage their repayments. The rules will not stop most people getting a mortgage but will ensure the size of the mortgage they get is affordable and they can pay it back.
Campbell Robb, chief executive of Shelter said: “This research shows just how much the mortgage market has failed to protect people, leading to thousands needlessly going through the nightmare of repossession.
“Every day our advice services help struggling homeowners pick up the pieces after being irresponsibly lent money they had no hope of paying back in the first place. Many people try desperately to manage the hefty mortgages repayments until one small thing, like an illness or a pay cut, pushes them into a spiral of debt and repossession.
“Reckless lending over the last few years, which saw some lenders giving out loans of more than 100 per cent of the value of the property and up to seven times people’s salaries, helped to fuel the rise in arrears and repossessions, not to mention an unsustainable house price bubble.
“And yet the banking industry still refuses to support the FSA’s proposals and make sure this reckless behaviour is never allowed to happen again.
Mr Robb continued: “With tough times ahead it is vital the Government and lenders make a genuine commitment to sensible lending which will prevent any more needless repossessions in the future.”
Notes to Editors:
1. Figures unless otherwise stated are based on data published in Annex 1 of Mortgage Market Review: Responsible Lending (FSA, 2010) available at http://www.fsa.gov.uk/pubs/cp/cp10_16.pdf
2. The number of repossessions that could have been prevented has been estimated using economic modelling. The model was used to estimate the impact of FSA responsible lending proposals would have had, had they been implemented over the period from Q2 2005 to Q1 2009.
3. The model included mortgage transactions data (Product Sales Data) from April 2005 to March 2009 that was matched to information about accounts that had been repossessed, had a possession order on place or were in arrears as at 1/8/2009 (collected by the Council of Mortgage Lenders).
4. For mortgages that were identified as unaffordable (using the criteria set out in Annex 1 of Mortgage Market Review: Responsible Lending), the model estimated that there would have been a reduction in the number of repossessions of between 16,900 and 18,500 over the period of analysis.
Source: Shelter Media Centre - 17,000 PEOPLE NEEDLESSLY LOST THEIR HOMES DUE TO RECKLESS LENDING, SHELTER REVEALS
Comment