Money News
Britain's financial watchdog, the Financial Services Authority, issued a stark warning about the state of the mortgage market and credit conditions. Speaking at the Council of Mortgage Lenders conference Clive Briault, retail managing director at the FSA, said, "There is a very real prospect that conditions will worsen further into next year, in terms of both liquidity and credit risks."
And if that's the message for lenders, you can bet it's also going to be a tough mortgage market for borrowers too! Especially for the estimated 1.4 million people whose short-term fixed- rate mortgages will end in 2008 according to the FSA.
"Many of these borrowers are on relatively high loan-to-value ratios or income multiples and will find it difficult (if not impossible) to refinance their mortgage on favourable terms, which will leave them facing a significantly higher interest rate on their borrowings, which may prove too much for many of them to afford," Briault said. He added sub prime borrowers "may not have access to the market at any price" until normal conditions return but gave no indication of when he thought that might be.
"Arrears and repossessions have increased significantly, albeit from a very low base and concentrated in specific sectors of the market. We expect lenders to meet the requirements on the treatment of customers in payment difficulties set out in our mortgages conduct of business sourcebook. Firms must have in place, and operate in accordance with, a written policy and procedures for dealing fairly with customers in arrears."
Don't expect your mortgage lender to be particularly sympathetic to any difficulties you may have. "A fairly consistent picture is emerging of some lenders across the market appearing to be unwilling to consider cases on an individual basis, unwilling to agree a solution tailored to the borrower's individual circumstances, and apparently adopting a one-size fits all approach to arrears recovery."
In his speech Briault announced that the FSA is to take an urgent look at whether mortgage lenders are complying with FSA rules and treating customers fairly in their practices for the handling of mortgage arrears and possessions. He said, "Clearly, this needs to be done as a matter of some urgency, before any further increase in arrears rates, and we expect the initial phase to be completed by the end of March next year."
05 December 2007 © Moneyextra.com
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