Lenders must be sensitive to customer needs, say Homeowners Alliance
A recent survey by the Homeowners Alliance has indicated that over a quarter of a million people are worried that they will no longer be able to afford their mortgage payments, as they are forced onto new repayment deals.
The Financial Services Authority have introduced tougher regulations on interest-only lending, which has seen many lenders withdraw interest-only deals completely and others have brought in additional criteria to make sure the borrower has a watertight repayment plan in place such as an ISA, pension or endowment.
Homeowners currently on interest-only mortgage who are coming to the end of their deal will be asked to prove they have a plan in place – in many cases, they will face an increase in mortgage repayment costs in order to cover the shortfall.
A quarter of those questioned feared that they may need to sell their home in order to cover the mortgage as they would struggle to make higher payments.
Paula Higgins, chief executive of the HOA, said: “Although designed to protect homeowners, the new rules could be a disaster in the making. Many homeowners on interest-only mortgages seem unable to afford the higher repayments they will face and could lose their homes.”
Higgins said lenders needed to be sensitive when letting explain the impact of the rule changes to their customers.
“They tempted homebuyers with the cut-price deals, and they must not abandon them now. Our research shows older people are the most worried – their options are reduced as remortgage options are severely limited,” she said.