Sensible lending urged

15 March 2011

A young homeowner couple

Mortgage lenders and the Government must genuinely commit to sensible lending to prevent people from needless arrears and repossession, Shelter has urged.

Shelter’s analysis of the Financial Services Authority's (FSA) figures reveals that 17,000 homeowners could have been saved from repossession if Mortgage Market Review regulation rules proposed by the FSA had been enforced over the past 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 high monthly mortgage payments.

The analysis also shows that borrowers wouldn’t have had to pay out more than £20 million in arrears fees when they fell behind with repayments.

On the day the FSA publish their latest repossession figures, Shelter is calling on the Government to support the FSA’s proposals which would introduce simple, common sense affordability and income tests to ensure borrowers can manage their repayments.

Shelter’s Chief Executive Campbell Robb said:

‘This research shows just how much the mortgage market has failed to protect people. 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.

‘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.

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.’

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