The Intermediary Mortgage Lenders Association has rebuffed talk of creating a government ‘mortgage protection fund’ – instead saying borrowers who are struggling to pay their mortgages should contact their lenders for tailored support.
The Liberal Democrats called for such a fund last November, suggesting grants of £300 per month could be offered to cover rising costs mortgage and energy costs. Now it’s leader Sir Ed Davey has repeated the calls, saying £3bn should be invested to help those in need.
Mortgage costs have soared in the past 12 months, with the average two year fix rising to 5.98% and the typical 5-year fix rising to 5.62% at the time of writing.
Kate Davies, executive director at IMLA, said: “Detailed communication between lenders and borrowers is crucial, because each borrower’s circumstances will be different and the most appropriate solution will also need to be tailored on an individual basis.
“This is a more targeted and effective way (and better use of resources) than setting up a government-mandated mortgage protection fund.
“Borrowers are feeling the pinch, and some will be harder squeezed than others. We have come out of a long period of very low interest rates, and it will take time for the markets to settle to a “new normal”. For those who need help most, there are options available.
“Expert advice from intermediaries has a huge role to play here, and lenders can offer a variety of solutions which are specific to individual circumstances.
“As an industry, we need to avoid fuelling sensational headlines and knee-jerk reactions – and concentrate on focusing practical help where it is needed most.”
IMLA went on to say the number of people who knowingly overstretched themselves when they took out their loans is relatively small and shrinking, owing to the mortgage regulation that has been in place since 2004, as well as the stricter rules that came into force in April 2014 which asked lenders to stress test all applications against higher interest rates.
The Liberal Democrats has been vocal on affordability issues.
Sarah Olney MP, its treasury spokesperson, has called for Prime Minister Rishi Sunak to hold an emergency summit with banks and lenders about the impact of rising mortgage rates.
She said: “The Prime Minister should haul the banks into Downing Street and discuss what extra support can be given to homeowners on the brink.
“The very least that Conservative ministers should do is take responsibility for the mess they’ve created instead of sitting on the sidelines.”
