What sort of mortgage help is the government proposing?
May 29, 2008
The mortgage meltdown that has occurred over recent months has not only affected the business of lenders, but has also left many homeowners in dire straits, particularly those that are due to come off cheap fixed rate mortgages over the coming months. Many homeowners that are due to come off cheap fixed rate deals will find it impossible to find another affordable deal in the current financial climate, and this means that many could struggle to keep on top of higher repayments, resulting in defaults and eventually repossession.
Naturally this situation has caused concern amongst industry professionals, homeowners, and government officials. In fact, the chancellor, Alistair Darling, and the housing minister, Caroline Flint, have held meetings with key mortgage industry officials recently in order to discuss the problems, and following the meetings have stated that homeowners that find themselves in danger of losing their homes through repossession will be able to rely on various forms of support from the government and banking industry.
The meeting was described as useful by the Council of Mortgage Lenders, and afterwards the housing minister Caroline Flint stated: “We want to ensure there continues to be stability and fairness in the housing market, and that the support is in place for consumers who may need it right now.”
However, despite the assurance the government did not outline exactly how homeowners facing repossession would be helped or what sort of support would be made available.
The mortgage sector has been in chaos over recent months, with tighter lending conditions hindering homeowners and would be homeowners from getting affordable mortgage deals, and lack of wholesale finances resulting in difficulties for lenders when it comes to funding their mortgage lending operations. The situation became so bad that the government has had to launch a mortgage rescue plan allowing lenders to exchange mortgage assets for government bonds in order to increase confidence levels and liquidity.
An official from the Treasury recently stated: “I think the government - now that the Bank of England has made this intervention to address the liquidity problem - will have to focus its attention on how to support the housing market.”
However, officials from other parties are concerned that the government plans may impact heavily on the taxpayer, with Vince Cable from the Liberal Democrats stating: “One of the possibilities being mooted…is that the taxpayer could have been tapped for additional money to provide additional benefits to people who are in mortgage arrears. We really need to find out exactly what has been happening in these talks so that the government isn’t making any more concessions at the expense of the taxpayer.”
However, Caroline Flint has been quick to point out that the situation is not as bad as it was in the 1990s, stating: “It is important to recognise we are dealing with an entirely different situation in the market from what was experienced in the early 90s. Demand for housing from first-time buyers and young families is high and the fundamentals of the economy are sound.”
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