Mortgage worries: FSA seeks to reassure panicky homeowners

05 March 2008 / by Joy Tibbs
A new Financial Services Authority (FSA) study shows that one in five UK homeowners are worried they will not be able to keep up mortgage repayments over the next 12 months, while a quarter had no plans as to how they will fund payments.

With the number of property repossessions up and many people's budgets becoming tighter as a result of the credit squeeze, many homeowners are increasingly concerned about paying the mortgage.

In response, the FSA has launched a £2 million advertising campaign to reach out to struggling consumers so that they are better equipped to handle finances and choose a suitable mortgage, particularly for those whose current deal is nearly at an end.

Director of financial capability, Chris Pond, says: "Economic conditions are getting tougher, putting pressure on family finances. As the UK's financial watchdog we can help."

The FSA's 'Stay in control of your mortgage’ checklist has three main points. First, it urges homeowners to review their budget and think of ways of altering it in case mortgage repayments rise rapidly. The second encourages people to start planning early and to talk to lenders in order to assess all the options available to them. Third, it tells people not to give up hope.

"Those who are really struggling, don't panic. Talk to your lender or get free, confidential debt advice."

Chancellor, Alistair Darling, is also looking at ways of improving the mortgage market, although his most recent proposal focuses on wholesale lending. His budget speech on March 12 is set to include a new grading system which will help separate out the most risky home loans from the safer options for lenders selling mortgages to long-term investors.

It is hoped that the new kitemark will help to re-establish confidence in the sector and will give mortgage-backed securities a way back into the market. This field has been more or less inactive since mid 2007 amid fears surrounding the sub-prime lending fiasco.

However, there has already been some resistance from banks who feel that, although the move may help to reduce mortgage rates for 'safe' borrowers, those without such good credit credentials who need a higher loan-to-value mortgage may find themselves left out in the cold.

It is thought that Mr Darling will discuss the criteria for kitemark loans with banks in the near future, and that the system could be introduced by the tail end of the year.

© Fair Investment Company Ltd