The housing and homelessness charity Shelter have indicated that 17,000 homeowners would have been saved from repossessions had the Mortgage Market Review’s (MMR) proposals been implemented five years ago. They came to this conclusion after having analysed the Financial Services Authority’s (FSA) figures and have strongly recommended that the proposals be implemented as soon as possible.

The proposals would have meant lenders doing “simple, common sense affordability and income tests to ensure borrowers can manage their repayments.” This would have meant vulnerable homeowners wouldn’t have been able to borrow beyond their means, and this would have saved them £20 million in arrears fees when they couldn’t afford their repayments.

Shelter’s Chief Executive, Campbell Robb stated:

“This research shows just how much the mortgage market has failed to protect people. Every day our advice services help struggling homeowners pick up the pieces after being irresponsibly lent money they had no hope of paying back in the first place.”

“Reckless lending over the last few years, which saw some lenders giving out loans of more than 100 per cent of the value of the property and up to seven times people’s salaries, helped to fuel the rise in arrears and repossessions, not to mention an unsustainable house price bubble.”

“With tough times ahead it is vital the Government and lenders make a genuine commitment to sensible lending which will prevent any more needless repossessions in the future.”

It is still unclear what effect this will have on contractor mortgage holders when it is implemented, as the “simple” checks might not be so simple when applied to the complex income structures that contractors can have. Whatever happens we will do our best to ensure contractors are fairly represented and hopefully not discriminated against financially.

Previously many contractors had to rely on self-certified mortgages which meant that they were being penalised financially as they were only able to secure morgage funding at a higher rate of interest. Many lenders did not carry out the necessary checks to verify income and what is being proposed by the Mortgage Market Review will ensure that this does not happen again, at least in the very near future.

The institute for Public Policy Research (IPPR) has released a report showing that England will face a housing shortfall of 750,000 by 2025. This is equivalent to the populations of Birmingham, Liverpool and Newcastle combined.

The IPPR’s analysis models the shortfalls with three different economic scenarios, and shows that, even with a faltering economy England’ housing supply will still be falling short of the expected growth in demand. According to the analysis the hardest areas hit by the expected shortfall are London, the South East, East of England and Yorkshire and Humberside.

IPPR Director, Nick Pearce, commented:

“We can’t go on as we have done. Britain needs to build more homes. That’s not going to happen without a fundamental review of housing policy. This new analysis shows the serious scale of the problem.”

“If the rate of house building doesn’t radically increase, we face a growing housing crisis. Whether the economy performs well or poorly, a serious gap looms between housing supply and demand. Our ageing population and rising expectations for living standards are going to drive up demand but if there’s no change in housing policy it will seriously hold back supply.”

For contractors it may mean getting on the housing ladder gets harder and harder over the next decade. With the removal of the borrowing hurdles that traditionally kept successful contractors from owning their own homes, we at Contractor Mortgages Made Easy have hopefully given extra options in the mortgage market place to meet those demands.

Author Bio: Taj Kang Associate Director at Contractor Mortgages Made Easy

Category: Finances
Keywords: MMR, mortgage, contractor, mortgages