The Council of Mortgage Lenders (CML) today met with Conservative leaders David Cameron and George Osborne to discuss mortgage market issues. The CML emphasised to the Conservative leadership that lenders exercise forbearance wherever possible with borrowers facing financial difficulties, as it is not in lenders' interests to take possession except where there is no realistic alternative.
The CML explained that the vast majority of people coming out of fixed rate deals in 2008 will absorb the rise in payments that they face. Those people least likely to be able to cope are those facing an unforeseen change in circumstances as well, such as reduced income. This group, while small in number, is the group that public policymakers most need to address. The CML urged the Conservative leader to consider policies to improve the woefully inadequate level of state support that currently applies to home-owners compared with tenants, that would help to redress the policy mistake made in 1995 when Income Support for Mortgage Interest was severely cut back under a previous Conservative government.
The CML also outlined the funding constraints currently affecting the mortgage market, as a result of the lack of funding currently available from wholesale sources. Initiatives designed to re-open wholesale funding markets should be the policy priority at present.
Any proposals to artificially dampen down interest rates for mortgage borrowers must take account of the realistic cost of funds, and are inappropriate in a UK context where most borrowers are coping with their payments and where the market can now have more confidence that rates are past their peak.
CML director general Michael Coogan commented: "We were pleased to have an opportunity to brief the Conservative leaders in person at their request. They are rightly concerned to address the issue of how best to support home-owners who may face payment difficulties over the coming year. As we explained, this can best be achieved through a mixture of lender forbearance and public policy. The main missing link at present is an appropriate benefits system targeted at those whose circumstances have changed, which has lagged behind what is needed to create a truly effective safety net in a market where home-ownership is the norm."
