Sources close to the FSA claim lenders want borrowers to receive mortgage interest support from the government so they will be guaranteed an income from interest repayments.
The comments were in response to a CML circular updating members on discussions currently being held with the Department of Work and Pensions (DWP) on guidance to Benefit Agency offices on flexible mortgages, and a review of the Mortgage Interest Direct (MID) scheme for Income Support for Mortgage Interest (ISMI).
The DWP has advised Benefits Agency offices that they must find out the 'true' capital balance outstanding on a mortgage on which interest would be calculated. The circular says: “The guidance states that in many instances specific details of the breakdown of the account may not be available to the lender, due to the nature of the account. The Benefits Agency office should obtain such information from the claimant's previous statements and from discussions with the claimant.”
Our source adds: “I find it staggering that the CML states that lenders don't know the position when the Benefits Agency asks them without demanding feedback on why this is so. Is the advice now to all borrowers to switch to flexible mortgages, since lenders apparently can't proceed with repossessions because they can't provide the breakdown? The tone of the circular suggests lenders want borrowers to get on to benefit support.”
Sue Anderson, head of external affairs at the CML, says: “The issue with flexible mortgages is simply that the balance can change. The point is that the benefits system needs to be able to take account of that for the purpose of working out how much entitlement people have to benefit.”