At the same time, the CML urges the government to focus on the mortgage funding markets as much as on the consumer-facing initiatives proposed today.
Michael Coogan, director general of the CML, says: “Essentially this package is directed at the blockages in the housing market for some vulnerable consumers. This is welcome, but until more funding is available we are still some way from restoring long-term stability to the housing and mortgage markets.”
He says there are no easy solutions to some of the problems. But it welcomes the announcement of reforms to Income Support for Mortgage Interest next spring.
He says:”Where the waiting time for new claims is being cut from 39 weeks to 13 weeks, and the upper ceiling for the size of mortgage that will be met is being raised to £175,000.
“For borrowers who will be eligible to meet all or most of their mortgage interest payments under ISMI, these reforms will make it much easier for lenders to exercise forbearance until benefit payments begin.
“The mortgage rescue proposals for some borrowers who would otherwise become homeless, while also welcome, will help only perhaps 6,000 households over two years. Lenders must – and do – see repossession as a last resort.
“CML members have committed to a range of measures designed to ensure that borrowers who may find themselves in difficulty have good access to advice services that can help them, as well as to alert them in good time to changes in their payments to allow them time to budget or to contact their lender to discuss alternative payment options if necessary.
“The new shared equity product to help first-time buyers will be useful for a particular tranche of would-be home-owners who genuinely wish to enter the market now. The proof of the pudding will be in its uptake, which may be fairly muted under current conditions but is likely to build up as buyers see the benefit of the interest-free equity loan.
“The Stamp Duty concession for properties under £175,000 is something of a curate’s egg – good in parts. It will reduce transaction costs for some buyers, which is welcome. But we estimate that around half of all housing transactions will still be caught by stamp duty.
“Over time, the housing and mortgage markets will recover. But in the meantime, the situation is painful for some home-owners, and problematic in terms of balance sheet management for lenders too.
“We continue to see the funding problems in the mortgage market as a fundamental bar to meaningful housing market recovery. We believe that the focus of the government’s attention should be at least as much on market funding as on today’s consumer-targeted measures.”
Coogan adds:”We will continue to work closely with the government on effective implementation of this package, and on other measures which can be brought forward under the Crosby review.”