Ami backs calls to protect mortgage prisoners
Earlier this week, the Financial Services Consumer Panel asked the FSA to put measures in place to protect borrowers who may otherwise become mortgage prisoners due to the shake up that the mortgage market is currently experiencing.
Through a decrease in the number of interest only mortgages available, as well as tightening of restrictions on borrowing as a whole, many customers may find themselves trapped in their mortgage and thus their properties due to a mortgage with a high loan to value or negative equity and be unable to pay back a mortgage they can’t afford, but also unable to move to a better deal that they might be capable of paying back.
If this situation happens to the thousands of borrowers who look likely to end up trapped in this position, both lenders and borrowers alike will suffer, as the borrowers will be unable to pay their mortgage repayments, but incapable of moving to a better deal or in some cases even selling the property to meet their loan amount, whilst lenders will end up losing money as the borrowers cannot afford to pay them back.
In agreement with the Financial Services Consumer Panel, the Association of Mortgage Intermediaries (Ami) has backed their call to reduce the impact of the mortgage market review by suggesting that lenders allow some flexibility to customers who already have borrowing, allowing them to move to a better and more affordable deal, and a 10% tolerance on the additional borrowing and the monthly cost of borrowing.
The plan with this is to uphold the new rules for new customers, so that they are completely aware going in of what their mortgage deal is, but to allow some wiggle room for borrowers who were not aware that these changes would take place during their mortgage repayment term.
If the plans are agreed with and put in place, they will be particularly helpful to those with contractor mortgages or who have used interest only loans in the past, and those with good payment histories. If the banks and lenders can resist alienating customers who until now have been loyal, kept up to date with payments and may use their lender for borrowing again, they are bound to put themselves in a stronger position in this weakened and thus fragile economy.
Article by: Andy McBride, Associate Director at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager.
Tel: 0844 44 88 800