It said the current structure, which sees the unemployed helped with their repayments after nine months and only on mortgages below £100,000, had lost touch with a market which has expanded rapidly since the last review in 1995.
The CML also believed the question of how far the expansion of home ownership in Britain should go needed to be addressed as government targets of 75 per cent would bring more high-risk borrowers into the mortgage sphere.
Writing in its ‘News and Views’ newsletter, it said: “Against a backdrop of rising arrears and possessions, the desire to expand home ownership presents crucial questions for the government, as well as for lenders. The reality is that many borrowers would be unable to survive nine months’ loss of income without incurring significant mortgage arrears. Back in 1995, Labour politicians were highly critical of the Conservatives’ decision to cut back entitlement to income support for mortgage interest. But in power, Labour has failed to increase state support for home-owners in difficulty.”
The CML believed a review of how and when assistance was paid needed to be undertaken.
It pointed out that if the cap had risen in line with house price inflation, it would stand at £300,000 instead of £100,000.
However, Tony Capon, head of intermediary sales at Salt, said: “We are not going to see repossessions at the levels of 1991. Therefore, unless something happens to the wider economy, I’d be surprised if the government changed anything.”
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