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Help urged for mortgage borrowers
The Government should give struggling mortgage borrowers more help to avoid repossession by keeping some temporary benefit arrangements in place for at least another year, lenders have urged.
The Council of Mortgage Lenders (CML) said that repossessions have so far been kept down to a much greater extent than predicted due to the Support for Mortgage Interest (SMI) scheme, which helps those who are having trouble with their mortgage payments.
The CML said that a more generous availability of SMI has helped a decline in repossessions over the last couple of years, which dropped to 37,000 in 2011. But it expects to see repossessions rise to 45,000 this year, due to the uncertain economy and tough employment conditions, at a time when household budgets remain under huge pressure.
The body, whose members are banks, building societies and other lenders, said that the decision to offer SMI on more generous terms over the last three years had helped nearly 250,000 people to remain in their homes at any one time.
It said two changes to the scheme had played a "critical" part in keeping repossessions down - the introduction of a shorter three-month qualifying period before people receive help instead of 39 weeks and a temporary extension to the size of loans covered by SMI from £100,000 to £200,000.
These temporary arrangements are due to be scaled back from next year if there is no further extension, the CML said.
The lending body said in its fortnightly newsletter: "Our response urges the Government to keep both of these measures in place for another year. Over the last three years, paying SMI after a three-month qualifying period and providing more generous cover have helped nearly 250,000 people stay in their homes at any one time."
The CML said the current £200,000 cap on mortgages qualifying for SMI is a more accurate reflection of today's house prices.
According to Halifax, the average house price stood at £192,000 in 2008, just before the decision to raise the capital limit for mortgages covered by SMI to £200,000. The average house price was £62,000 when the lower capital limit of £100,000 was first introduced in 1995.
The CML argued that the temporary 13-week waiting period for SMI also increases the likelihood that mortgage arrears will not spiral out of control before help is given, and borrowers stand a better chance of being able to get to grips with their finances once more.