Sue Anderson, Council of Mortgage Lenders (CML)

The CML welcomes the Government’s new attempt to create a wide-ranging strategy around the issue of over-indebtedness.

This has a number of strands, ranging from the Financial Services Authority’s (FSA) work in trying to increase financial capability among consumers and responsible lending disciplines to reduce the risk of problems in the first place, through to the proposed new procedures put forward by the Department for Constitutional Affairs to increase the range of choices for how debt can be dealt with.

While most of the issues probably have more resonance for the consumer credit sector than the mortgage sector, some themes will need to be considered across the board. The CML will be working through the detail, responding to the consultations and keeping lenders informed. There is no doubt that responsible non-conforming lending will help to achieve the Government’s objectives.

Julian Wells, Mortgages plc

Lenders often wrongly have the finger pointed at them on the issue of over-indebtedness. The basic principles of lending dictate that you do not ever lend to someone who you do not believe has a willingness and ability to repay you.

Any sensible proposal to limit over-indebtedness has to be welcomed throughout the mortgage industry. The FSA’s responsible lending rules place great emphasis on affordability and all non-conforming lenders will have studied these very carefully and assessed them against their own lending policies.

Any impact of such a proposal will be on the mortgage market as a whole, not just the non-conforming sector, as the assessment of indebtedness and affordability are issues that face all lenders.

Tim Sturley, Mortgage Express

Our approach to over-indebtedness is avoidance. Unlike some lenders who rely solely on technical credit scoring, we also employ underwriters who ‘sense’ check every case to ensure we only lend to customers that can afford it.

But, even the most prudent lender will encounter arrears. Our approach to arrears is in line with the Government’s policy – we try to understand borrowers’ individual circumstances, appoint a case owner and provide debt advice over the phone. Over-indebtedness is in nobody’s interest. It will be interesting to see further details of the strategy, but we support initiatives that encourage responsible borrowing and prudent lending.

Matt Grayson, BM Solutions

It is a broad report, which attempts to address a number of issues. However, detail is needed in two key areas. According to the Association of British Insurers, there is a £50bn savings gap in the UK. Therefore, consumers do not have a liquid savings ‘pot’ to deal with financial emergencies.

The second thing is that financial literacy is a massive issue, which needs to be addressed as early as possible in schools.

As well as responsible lending, there is such a thing as responsible borrowing. However, if you drive a car it is unreasonable to expect that you will not incur a few bumps and scrapes along the way. The same applies to personal finance. There will always be a need for non-conforming loans for those people who have fallen into arrears through no fault of their own.

Frances Scanlan, Knight Funding

Generally, individuals take a very short-term view about their financial security – not just borrowing too much but saving too little and not providing enough protection cover for themselves for unexpected loss of income. Any strategy to re-educate the public into taking responsibility for its own financial wellbeing is to be warmly welcomed.

This strategy is mainly concerned with the over-indebtedness in consumer credit of vulnerable individuals who are often in the lowest income bracket. Affordability limits are well defined in mortgage lending, so mortgage borrowers – whatever credit profile – are already subject to checks on financial over-commitment.

Regarding the non-conforming mortgage market, if these measures can achieve a higher level of responsible borrowing, this is bound to feed through eventually to individual credit records. In the meantime, non-conforming lending continues to offer the opportunity for those who have had credit problems to achieve homeownership.

Matthew Bright, Optoma

One could be cynical and say that the Government has regulated the mortgage industry but vast amounts of lending, such as second charge and unsecured personal loans, remains outside regulation. Any central initiative has to acknowledge that a willing salesman will match consumer demand and that financial education has to start long before the debt even occurs.

I trust that the non-conforming lenders have been consulted as they often assist greatly in getting someone back on their feet from a debt situation. Making it more difficult for non-conforming lenders to lend would potentially be counterproductive to overcoming a consumer’s indebtedness. I hope the initiative will see the emergence of more credit repair type products that help the consumer back on their feet.

David Hollingworth, London & Country

Preventing the consumer from reaching a situation where they find themselves drowning in debt revolves entirely around the principles of responsible lending. Mortgage lenders have found themselves in a difficult position of where their customers are certainly demanding levels of borrowing in excess of standard income multiples in order to borrow enough to purchase their home. The lenders have had to temper their wish to do business with a sustainable and responsible attitude.

Rather than hike the income multiples on offer, lenders have utilised sophisticated credit scoring and affordability models to provide a more individualised lending agreement so, some borrowers will be advanced more than others.

With the cornerstone of regulation being responsible lending, the market and, the consumer should welcome any measure to curb potential exploitation of the vulnerable.