National charities Citizens Advice and Shelter are backing the Financial Services Authority’s mortgage lending proposals.
The charities are urging the government not to allow a return to the irresponsible lending that caused misery for thousands of homeowners.
In a joint letter to housing minister Grant Shapps, the charities are supporting the FSA’s proposals to introduce affordability and income checks.
Failure to stamp out reckless lending for good, say the charities, would be a missed opportunity and potentially a costly mistake.
They add that it is vital that the government does not allow a return to the soft-touch regulation of the past that devastated the housing market and put thousands of homeowners on the brink of homelessness.
Gillian Guy, chief executive at Citizens Advice, says: “We saw 115,000 problems last year relating to mortgage and secured loan arrears and see countless ongoing problems resulting from vulnerable borrowers given mortgages they could never have afforded to pay from the outset or once the discounted periods ended.
“These proposals are about the FSA ensuring that mortgage lenders and borrowers take proper care to consider whether a mortgage is affordable and sustainable over time before entering in it.”
Kay Boycott, director of campaigns, policy and communications at Shelter, says: “From our research we know that millions of people are already struggling with their mortgage payments and every two minutes someone faces the prospect of losing their home. We urge the government to support the FSA’s proposals to ensure we prevent even more people from living on a knife edge.”
The charities highlight the case of a Somerset man who came to the CAB for advice about his mortgage possession in 2009.
He and his wife had taken out a mortgage less than a year earlier with a sub-prime lender.
The mortgage repayments were £981 per calendar month, but their combined monthly income net of disability benefits was only £987.