Lenders to face tighter controls, Brown says

16/02/2009

Gordon Brown has promised to crack down on what he terms as "unscrupulous" practices by mortgage lenders.

Speaking to chairmen of parliamentary committees, the prime minister said that he would work to limit repossessions in the UK - rates of which have been forecast to rise as the housing slump and economic downturn wears on.

"I don't believe that some of the practices used can be justified and we need to give people better rights than they currently have," Mr Brown said.

"We are talking to banks and building societies about giving consumers an extension of time to pay their mortgage."

He added: "At the bottom end of the lending market there have been unscrupulous practices that have deprived people of rights that they should have in a civilised society. We have our eye on that."

The prime minister's comments come in the wake of the financial watchdog's announcement that it will move to take closer control of the largely-unregulated sale and rent back sector.

Providers, who offer customers struggling with their mortgage repayments the opportunity to stay in their homes in exchange for selling the property to them and then paying rent, have been criticized by consumer groups for treating tenants unfairly.

A report from the Office of Fair Trading revealed last year that some customers were being evicted as early as six months after selling the property - while others were facing rent hikes.

EuroDebt director Kevin Still commented: "One of the difficulties the government faces is that the large Council of Mortgage Lenders (CML) members have adopted the mortgage arrears Protocol, but the evidence suggests that it is the plethora of smaller niche lenders that emerged from private equity funds that are the most aggressive during the current economy."

He added: "We have also seen a number of opportunists, like buy-to-let landlords, taking advantage of the lack of regulation in the sale and rent back market. Some are simply exploiting consumers in financial hardship and others simply hadn’t expected the downturn in the market and can’t afford the mortgage repayments, putting their tenants at risk. It is not uncommon for EuroDebt to have to help both the landlord and tenant with unmanageable debt problems."

Tags; Housing Debt and Bills, Young Family Finances,

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