CA claimed non-conforming lending was ‘undermining’ home ownership and hard-line tactics towards borrowers were driving the increase in arrears, court actions and repossessions.
Last year, CA dealt with 57,000 problems relating to mortgage and secured loan arrears, an 11 per cent increase on the previous year. It said that the current regulation and safety nets were failing to protect vulnerable borrowers.
David Harker, chief executive of Citizens Advice, said: “Our research suggests that many aspiring home owners have been mis-sold unsuitable and costly home loans that are doomed to fail from the start. Many lenders are flouting the rules on responsible lending by granting loans when it’s clear the borrower will not be able to afford to repay from the outset, then getting tough immediately things go wrong.”
However, lenders have hit back at the report. The Council of Mortgage Lenders (CML) called it ‘too simplistic’, with results based on a skewed sample of borrowers. Michael Coogan, director-general of the CML, commented: “CA has taken a sensationalist tone in this report, which risks throwing the baby out with the bath water. In fact, non-conforming mortgages give people a way to rehabilitate their finances and are important in a financially inclusive market.
“It’s a pity, as we agree with many of the underlying policy recommendations, particularly about the need for the government to improve the woefully inadequate public safety net for those who fall into difficulties.”
Peter Williams, executive director of IMLA, said: “The report implies that there is a ‘hidden crisis in the sustainability of home ownership’ and ignores the fact that the fundamentals of the market remain strong even if we are experiencing short-term difficulties.”
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