(Alliance News) – Bosses of the UK’s financial watchdog have said lenders need to “step up” to support stressed homeowners facing surging mortgage rates.
Richard Lloyd, the interim chair of the Financial Conduct Authority, said it is watching banks “closely” to ensure they live up to the regulator’s standards during the cost-of-living crisis.
He told the Treasury Committee: “On the state of the (mortgage) market, of course we are worried”
“This is extremely stressful for individuals, for their mental health and finances in a way that people haven’t experienced in the housing market for some time.
“Therefore, we really need lenders to step up.
“We are ready to do more, but at the moment we are in the stage of making very clear to lenders the kind of standards that we expect.”
Lloyd explained that this involves certain expectations over how people will be treated if they do fall into financial difficulty, and the need for effective communications and tailored support.
Nikhil Rathi, the FCA’s chief executive, emphasised that 18 to 30-year-olds who became first-time buyers in the last few years are particularly at risk.
“Quite often they will have stretched themselves to purchase a property”, he said.
“They may have got a fixed-rate mortgage at 2 to 2.5%, and when that expires, may be looking at a materially higher rate at 5% or more.
“That’s a part of the market that we need to watch very closely indeed.”
The remarks come as the average two- and five-year fixed-rate mortgage surpassed 6% for the first time since 2008 following the former Chancellor’s mini-budget, which sparked volatility in the financial markets.
It means that homeowners could face much higher mortgage rates once their current deal comes to an end, and it has raised fears that more borrowers will amass debt that they cannot afford to pay off.
But Rathi told the Treasury Committee which was scrutinising the leaders of the regulator that the UK is in a much more resilient period than it was during the 2008 financial crisis.
“I don’t think that we are in the same situation that we were a decade or so ago”, he said.
“We have seen the lowest numbers of customers in arrears since 2007.
“Not diminishing how serious the situation is and how challenging this period is going to be for consumers around the country, we are going into this situation in a much more resilient position than in previous cases.”
He added that there are important intervention measures that lenders can take to help struggling mortgage holders, such as offering forbearance holidays, extending their mortgage term, or re-considering early repayment charges.
Helping customers find their feet would be a much better outcome than having to repossess their home, both for consumers and for banks, he said.
Both bosses stressed that the FCA was working hard to ensure the UK does not enter a crisis similar to the financial crash.
Rathi acknowledged that there are “pockets of bad practice” in the industry, but that the watchdog is taking action to ensure badly-behaving firms “sort themselves out”.
By Anna Wise, PA Business Reporter
source: PA
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