Repossession crisis postponed, not averted, warns Cable
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Liberal Democrat shadow chancellor Vince Cable has warned that a repossession crisis may have been postponed rather than averted.
Cable is due to address the industry on responsible lending on March 17 at a Council of Mortgage Lenders conference.
He has supplied a draft copy of his speech to the CML - in it he warns that a continuing rise in unemployment and any future increase in interest rates could push many over the edge.
He says: “A repossession crisis may have been postponed rather than averted. And, outside the south east, where a domestic property slump has largely been avoided, there is a serious negative equity problem.”
Cable suggests that as part of its Mortgage Market Review, the FSA should re-capture the old fashioned building society model of lending which was lost in the feeding frenzy after demutualisation.
He says the FSA is right to emphasise safety as with tighter verification procedures for self-certification, which he refers to as “criminal fraud”.
He adds: “What I would want the FSA to do is to introduce a traffic light system: a yellow light, a warning, for high risk mortgages of 90% or more requiring stringent checks; and a red light, a ban, for new mortgages (as opposed to remortgaging) of 100% or more, the lending which got us into this mess in the first place.
“That way, there is a clear signal that the wild excesses of the past will not return.”
Readers' comments (2)
JOHN BENNETT | 2 Mar 2010 3:20 pm
As a surveyor valuing houses for over 40 years here is the one person i know to be right. I might even vote for his party except for there policies. He however is someone we should listen to as he is generally SPOT ON.
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Anonymous | 2 Mar 2010 4:22 pm
Vince Cable is a man who generally speaks sense, and has done again with the repossession comments. The ticking time bomb we face is the inevitable rise in interest rates which will affect the sector he refers to as criminals, those who chose to self cert their income. As this market has been wiped out these people will have no option but to remain with their current lender at the mercy of rising rates. Keep in mind that the revert rates were more often than not linked to BBR or LIBOR meaning payments now of substantially less than the original fixed rates. Once these rates rise we will see countless repayment difficulties with this sector leading to mass repossessions. Until something is done to allow these people to remortgage repossessions will increase beyond all previous estimates. Referring to self cert as 'criminal fraud' is a scandalous statement. The product was abused but not by everybody. Lenders were allowing this to happen but chose not to care as the mortgages were securitised soon after origination so became somebody elses problem. These banks were bailed out by the taxpayer while a sector of the mortgage market become prisoners trapped with a mortgage lender. Thanks FSA, TCF at its best!
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