In its report, “Mortgage Arrears and Access to Mortgage Finance”, the Committee concluded that first-time buyers, sub prime borrowers and those remortgaging faced serious difficulties in accessing mortgage finance as the number of high LTV mortgages have fallen sharply and lending criteria has become increasingly restrictive.
However, Ray Boulger, senior technical manager at John Charcol, said the report demonstrated a complete lack of understanding of the market because it ignored certain sectors.
He commented: “Including the self-certification sector, there are as many as 3.5 million UK households who are currently unable to move because their lack of equity means they cannot raise a deposit. This is a serious problem as there are very few mortgage deals available for people with less than 15% equity. Even these deals tend to have very high interest rates and are subject to stringent credit scores from lenders.”
Andy Frankish, managing director at Mortgage Talk, agreed the report underestimated the people affected by a lack of access to mortgage finance and said lenders needed to lend at controlled levels of higher LTVs to start to solve the problems of mortgage finance access.
He added: “There are many people who want to move and buy but the problem of decreasing equity is inhibiting people from moving. Lenders may need to put aside money at a higher LTV for different categories of customers as a return to lending at reasonable and sustainable levels would help the market.”
In terms of arrears, the Committee criticised the FSA for taking a ‘leisurely approach’ to firms who charge high fees on struggling borrowers to generate additional revenues.
Hector Sants, chief executive of the FSA, responded that there will be tougher action in the future as the regulator had more enforcement cases in the pipeline.