In a report by Fitch Ratings entitled: ‘UK Banks: Managing the Consumer Debt Burden’, the firm believed UK lenders were in a strong position overall and the market was continuing to post ‘historically low arrears’.
However, Fitch Ratings expressed its concern that mortgage payments as part of consumers’ overall outgoings were creeping up and this was not being helped by adverse lenders relaxing their criteria.
Gordon Scott, managing director of Fitch’s Financial Institutions Group, said: “Non-conforming lending is showing stronger increases in arrears and is the most perturbing mortgage product in the UK market. Competition and rising housing prices are encouraging some players to loosen their credit criteria on a selective basis, for instance by increasing their maximum income multiples.
“In terms of affordability, mortgage payments as a proportion of household income are expanding and reaching levels close to those witnessed in the early 1990s. This is being further exacerbated by pressure on disposable incomes from increases in non-discretionary spend, such as fuel, utility bills and council taxes.”
Fitch Ratings compared the situation with the credit card market, which, it claimed, had reined in its credit criteria in recent months.
Tony Capon, head of intermediary sales at Salt, commented: “We haven’t seen a relaxing in terms of criteria but we are now pushing up and seeing some high income multiples. However, you have to be wary of history repeating itself as in the late-1980s, bad debts arose where lending criteria had been relaxed and very high loan-to-values were on offer.”
