Is Britain sleepwalking into a home repossession crisis?
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Version 0 of 1. Is Britain sleepwalking into a home repossession crisis? The Financial Conduct Authority (FCA) has renewed an appeal to people with interest only mortgages to urgently contact their lenders. It comes amid fears that a significant number of the homeowners with this sort of loan lack a means of repayment, which puts them at risk of being turfed out when they reach term. Such loans are sold on the basis that borrowers will run savings plans alongside them to build up a sufficient pot of money to pay back the capital. For those after flexibility, and with the means to take on the risk that comes with this sort of product, they can be fine. But they have, over the years, been taken out by many people who weren’t always fully aware of the risks they were taking on. Others, meanwhile, took advantage of them so they could afford to buy their dream homes, or just any home in certain parts of the country, without addressing the issue of how to repay the capital. Sensible lenders would have known that advancing money to those in the latter group was potentially asking for trouble, for them as well as the borrower. But as we all know, there have been times in this country’s recent history where sensible lenders were thin on the ground. The number of pigeons coming home to roost is expected by the regulator to peak in the next ten to 14 years, so there is time for people to, forgive me, get their houses in order by putting more money aside, switching to repayment mortgages, even extended the term of their loans. What worries the watchdog is that while lenders have been attempting to contact borrowers to discuss how they might do that at its behest, it seems that a significant number are ignoring their attempts at communication. Partly it is because, surprise, surprise, they don’t trust banks. The FCA has successfully induced lenders to significantly reduce the number of interest only mortgages being sold today, which is a thoroughly good thing. But there are still 1.65m of them out there - nearly one in five of the total - and what it does not know is how many of the people holding them are in a really sticky situation. As part of the work it is doing on the sector it would be a good idea for it to try and find that out, and then consider whether it’s going to take more than a few letters and phone calls from lenders to head off a potentially nasty situation. |