The Council of Mortgage Lenders (CML) said it accepted the case for reducing the interest rate on payments from 6.08 to the Bank of England’s average mortgage rate of 3.63% but asserted the 13-week qualifying period for payments had to stay.
However, the trade body said the move would put more households under financial pressure because fewer borrowers will receive payments covering their mortgage interest in full.
CML director general Michael Coogan said: “A combination of low interest rates and the concerted efforts of borrowers, lenders and the government have brought about a reduction in arrears and possessions, despite the economic slowdown.”
He added paying benefit at a lower rate will put extra pressure on household finances, and any borrower anticipating payment problems should talk as soon as possible to their lender, who will treat them sympathetically and try to work out a solution with them.
“Lender forbearance has played a crucial role in keeping arrears and possessions in check, and this is reinforced by the certainty for lenders and borrowers of benefit payments, albeit at a reduced rate, within 13 weeks,” he said.
“But any move to lengthen the qualifying period – and in particular a return to a 39-week waiting time – will seriously undermine the efforts of lenders and borrowers to work together to try to ensure that going into arrears does not result in the home being repossessed. Continuing government support, including the funding of debt advice, is vital in helping keep people in their homes.”
