Now is not the right time to cut back on mortgage bail-out schemes, it has been suggested by a leading industry expert.
Paula John, editor of Your Mortgage, was sceptical of the government's decision to reduce and revise the Mortgage Rescue Scheme. The deal was initially designed to help homeowners who were having trouble coping with their mortgage repayments.
She pointed out that in light of the negative impact the recession has had on the personal finances of people, this move is "incredibly bad timing".
Housing minster Grant Schapps recently announced that the government is set to revise the scheme with an intention to reduce the rate of grant paid to local housing associations.
The decision was possibly fuelled by the fact that the scheme had only helped 34 people since its launch in 2009.
Ms John pointed out the decision is likely to cause concerns among homeowners who are already vulnerable to any slight fluctuations in the mortgage lending markets.
She said: "More people are likely to struggle with the cuts in public sector spending which are likely to impact on redundancies, increase unemployment and affect people's abilities to repay their mortgages. What you would hope for is more support rather than less at this juncture."
It was understandable that the government is trying its best to cut back on spending in order to bring its budget deficits under control. However, Ms John was doubtful about whether ministers had chosen the right sector to implement cuts.
In recent times, the Financial Services Authority issued new guidance to make mortgage lending more fool-proof. The regulatory authority has instructed lenders as well as intermediaries to ensure that thorough checks are conducted to establish that an applicant is able to repay the mortgage and would not default. It also announced that extra protection would be extended to customers who had credit-impaired history.  |
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