Members to the question on mortgage lenders and loan shortage repossession

 

Saturday, Jun 20,2009, 10:29:40 AM   Click:

Mortgage lenders could be crossexamined by MPs next month as part of a commission of inquiry Treasury rising repossession and the chronic shortage of housing loans.

The inquiry, announced yesterday, will review the success of government initiatives aimed at reducing the number of families lost their homes, which is expected to reach 75,000 this year. It also examines the approach taken by lenders to customers in arrears, including low-income borrowers regarded as sub-prime.

Sally Keeble, a member of the committee, said: "We want to talk about constructive lenders such as Nationwide, as well as those who are perhaps on the wrong track, to get to the heart of the problems on the market. "

The committee also asked for written comments on the availability of home loans, especially for first-time buyers. The controversial sale and lease-back market will also be in the spotlight.

The investigation was announced as a leading economist warned that repossession does not point in 2011. Ian Shepherdson, chief economist at High Frequency Economics, a consultancy, said that 120,000 people could lose their homes in 2011 as unemployment is skyrocketing. The National Statistics Office revealed yesterday that unemployment rose by 232,000 to 2.26 million in the three months to April.

However, the Council of Mortgage Lenders (CML) in May to revise the estimate of 75,000 this year, its figures show that 12,800 households - less than expected - have lost their homes during the first quarter of this year.

Frances Walker of the Consumer Credit Counseling Service of the debt charity, said: "The evidence is that the initiatives the government has implemented have had a positive impact and we are witnessing a flexible attitude by lenders.

The return of first-time buyers to the housing market, considered essential for a complete recovery is hampered by a shortage of mortgages and high rates charged by lenders. The number of mortgages on the market has declined since the credit crisis began in mid-2007. There are only 1265 mortgage deals offer, compared with 11,951 in July 2007, according to Moneyfacts.co.uk, the financial site.

Halifax, Britain's largest lender, charges first purchase with a deposit of 6.74 by 10 per cent for a five-year fixed-rate deal, compared to 4.19 percent owners of a deposit of 40 per cent.

Mortgage has fallen to historically low levels as lenders struggle to obtain funds from money markets. Mortgage approvals rose 16 percent in April, the CML figures show, but still 28 percent lower than the same month last year.

Written submissions were requested by banks, building societies, trade organizations or other interested parties by July 1 and the committee is to report before the beginning of August. The Treasury will have two months to respond to its recommendations.