Responding to the Mortgage Crisis
With repossessions at their highest level since the housing market crash of 1991, and more than 30,000 people set to lose their homes on current trends before next April, a new report from the Centre for Economic & Social Inclusion argues that radical measures should now be taken to help hard pushed borrowers reduce mortgage payments and to improve court protection against repossession.
The report highlights the fact that the cost of mortgage repayments, relative to household income, has been steadily increasing since 2004. This has now been combined with a ‘de-coupling’ of mortgage rates from bank base rates as a result of the global financial crisis – causing the cost of borrowing to rise rapidly, a surge in arrears, and a rush to repossession by lenders who have also seen house prices fall dramatically.
Pointing out the more pro-active approaches now being taken by regulators in the U.S where ‘loan modification’ programmes are now being introduced to ensure no-one pays more than 34% of their income on mortgage repayments, Damon Gibbons, Head of Policy and Partnership at Inclusion, commented:
“Restoring mortgage affordability is critical to reducing the number of repossessions. There is a strong case for government to insist that banks introduce a mortgage restructuring scheme in the U.K in order to achieve this. The new UK Financial Investment Company should ensure it uses the £37 billion of taxpayer investment in Britain’s banks as a lever to achieve this.”
The full report is available here :
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