Fri 20th Jun, 2008
Mortgage lenders warned worst yet to come
The Financial Services Authority (FSA) has warned mortgage lenders that the credit crisis is going to get worse and there may be more Northern Rock type fiascos to come.
The FSA is urging lenders to cut back on new lending in a bid to strengthen their financial positions as well as not to rush into repossessing borrowers’ homes who are struggling with their loan repayments.
The FSA has found a significant rise in arrears and repossessions in the past few months and bad times are yet to come since there are still 1.4 million borrowers out there on cheap fixed rate home loans that are set to come to an end in the coming year.
The FSA has found that most lenders are taking a blanket approach to customers in difficulty and that this has to stop. The announcements were made by the FSA in a speech delivered to the Council for Mortgage Lenders (CML). The CML called on the FSA to support their calls for the Bank of England to pour more money into the financial system, which has dried up in recent months.
The FSA requires lenders to treat customers fairly and considerer customers on an individual basis. However the FSA has told the CML that there is a consistent picture emerging of many lenders now unwilling to consider cases on an individual basis as well as being unwilling to agree to tailored solutions to borrowers’ individual circumstances and are taking a one size fits all approach to recover arrears.