Katie Pender (pictured), managing director of Target Group, a provider of business process outsourcing and operation transformation specialising in provision of lending, investments and savings services, said Chancellor Jeremy Hunt’s measures in the Mortgage Charter were “short-term measures” trying to solve “what is likely to be a mid-term problem”.
“Forbearance is a short-term solution designed to meet issues such as a job loss or a change in circumstance. It is not a mid-term solution to systemic affordability issues triggered by rising interest rates.
“Overreliance on forbearance will come with a cost for the mortgage market as a whole and homeowners. Firstly, paying interest-only will prolong the term of peoples’ mortgages, costing them a lot more over the long-term. Additionally, it will affect their credit score – therefore harming their future borrowing opportunities and exacerbating affordability shortfalls further,” Pender added.
She continued that the market “in some respects” was in a “catch-22”.
“Do we try to prevent repossessions, although it’s clear that many people will now not be able to afford their homes, or do we hurt homeowners further down the line by propping up arrangements that may actually be unsustainable?” Pender added.
She called on the government to “provide a clearer and more nuanced strategy”, saying “otherwise this problem will re-emerge”.
Pender said mortgage support that had been introduced in previous years would not work as the market was totally different, but said tax could help bring down inflation.
“No one wants to be paying tax, but to curb inflation we need to make people think twice about spending. In my view, this means taxing non-essentials, such as flights.
“Of course, this is unfair on the aviation industry which is only just recovering from the crippling effects of the pandemic; but realistically we need to start somewhere and stop people spending. Surplus from this could then be used to help the very poorest keep their homes,” she noted.
High levels of borrowing
She said a discussion on affordability stress-testing was needed, as some households would have taken on “eye-watering levels of debt, which is now really hurting them”.
“After 2008 the industry learnt its lesson, but it’s time for another review – including looking at schemes such as Help to Buy where we’re encouraging people with little capital to take on alarming levels of debt. Watching and waiting is over.
“We need to act now to help protect the market,” she said.
