While I’m sure we would all agree with Shelter’s desire to see commonsense affordability checks, its claim that 17,000 repossessions could have been prevented had the Mortgage Market Review affordability measures been in place is simply nonsense.
Indeed, the Financial Services Authority proposals as they currently stand are likely to reduce consumers’ ability to borrow and consolidate debt which, in turn, may well result in increasing repossession figures.
And while everyone lambasts irresponsible lenders, they actually provided a lifeline to many consumers who ran into difficulty and would otherwise have been repossessed by their former lenders.
Ability to pay may not be the most important factor in avoiding repossession. More attention needs to be paid to consumer education
Both the FSA and Shelter have neglected consumer habits when formulating policy.
For every bad lending decision there was a bad borrowing decision and there are no doubt many reckless consumers who would face repossession regardless of any affordability rules.
In April, the Consumer Credit Counselling Service produced some illuminating statistics that showed the average unsecured debt of home owners counselled last year was in excess of £30,000.
The average mortgage payment was cited as £561 and simple calculations suggest that for many people the mortgage payment will be less of a burden than unsecured debt.
This then suggests mortgage affordability may not be the most important target and that more attention needs to be paid to consumer habits and education if Shelter’s and the FSA’s worthy goals are to be achieved.
RS Mortgage Consultancy