Our latest research has found that one in four people with a mortgage are worried about having their homes repossessed. Is there anything government and lenders can do to address this lack of confidence?
Our Quarterly Consumer Report report found that more than 50% of people under 30 who don’t already own a home are worried about getting on the property ladder, and over half the population are worried about their mortgage rates. So what’s the government doing to help these people?
No help for first-time buyers
I’ll start with the recently launched Funding for Lending scheme, which is designed to boost lending to households and businesses. It encourages banks and building societies to lend by allowing them to borrow money from the Bank of England for up to four years at below-market rates. So far, 13 lenders have signed up.
Following the launch of the scheme, a number of big high street names cut their interest rates on selected mortgage deals, making some of them the lowest fixed-rate deals that have ever been offered in the UK.
So it sounds like good news, until you realise that many of these competitive deals were aimed solely at low-risk borrowers with large deposits. When some of these mortgages require deposits of up to 40%, it’s clear that they’re not aimed at first-time buyers.
We think the government should introduce clearer rules for the Funding for Lending scheme to make sure banks and building societies pass on this cheap finance to first-time buyers and ‘mortgage prisoners’.
Our report found that mortgage prisoners are often people aged between 30-49. They’re trapped in their current mortgage deal, as they are unable to switch if and when their rates increase. This group already has the greatest housing-related costs, as we found they’re spending on average £186 a week, compared with the national average of £135.
We‘d also like to see greater transparency from the banks and building societies that have joined the Funding for Lending scheme, including publication of details of their mortgage lending under the scheme.
Difficult times ahead
So, home ownership is increasingly out of reach for first-time buyers, while many mortgage prisoners are unable to move or remortgage. This is all thanks to a lack of mortgage lending, the need for a large deposit to get on the housing ladder, high mortgage arrangement fees (which we found have risen by around 60% in the past eighteen months), rising rents and squeezed household budgets.
If banks are going to take advantage of cheap funding, I think they should be under tougher obligations to pass the benefit on to those consumers who are currently struggling. If not, a whole generation could find itself unable to get on to or move up the housing ladder, while the fear of repossession could become a painful reality.