One in four worried about having their home repossessed

Which? is calling for the Treasury to put tougher obligations on banks taking part in the Funding for Lending Scheme as new research finds half the population are worried about mortgage rates and a quarter (26%) of people with mortgages fear having their home repossessed.

The findings, published today in the Which? Quarterly Consumer Report, reveal a fragile housing market dividing the nation.  An increasing gap is developing between older, more financially secure homeowners and those who are struggling, namely those who are aged 30-49 who bought their homes recently and younger people who can’t get on the property ladder.

Many people in the 30-49 age group are ‘mortgage prisoners’ trapped in their current mortgage deal, unable to switch when rates increase*.  This group has the greatest housing related costs, spending on average £186 a week, compared with the national average of £135.

The Quarterly Consumer Report also reveals that home ownership is increasingly out of reach for first-time buyers with rising rents making it harder for people to save for the large deposits needed. More than half (54%) of people under 30 who don’t own a home are worried about getting on the property ladder.

Lenders have also increased mortgage arrangement fees, which have risen by around 60% in the past eighteen months to an average of £1,472 in August 2012.

Our findings, revealing the depth of problems in the housing market, come at a time when banks and building societies are being given access to cheap funds through the Government’s Funding for Lending Scheme. However, more than 1.6 million people with mortgages have been hit by increasing Standard Variable Rates on their mortgages, meaning they are now paying about £400 million a year extra despite the Bank of England base rate remaining unchanged for more than three years.  We want the Government to ensure lenders that have been given access to cheap finance pass this on through lower borrowing costs to help all borrowers, not just those with significant equity. We don’t want to see the Funding for Lending Scheme widen the gap between secure homeowners and those who are struggling through no fault of their own.

Which? executive director Richard Lloyd said:

“The housing market is failing not just one but two generations of consumers, with many mortgage prisoners trapped on their current deal and young people excluded from the housing market altogether.

“The Chancellor must put tougher obligations on banks that get cheap finance through the Government’s Funding for Lending Scheme so that more is done to help those who are struggling through no fault of their own, and especially to ensure that mortgage prisoners and first time buyers can benefit from lower borrowing costs.”

Which? is calling for:

>               The Government to put in place clearer rules for the Funding for Lending Scheme to ensure that banks and building societies pass on this cheap finance to mortgage prisoners and first time buyers.

>               The Government to publish its expectations for the scheme, and what safeguards are put in place to ensure that banks pass on cheap funding to consumers.

>               Greater transparency from the banks who should publish details of their mortgage lending using the Funding for Lending Scheme.

>               Banks to stop increasing arrangement fees, which have risen by around 60% in the past eighteen months to an average of £1,472 in August 2012, to bring down the costs for people to switch to another mortgage deal.

 

Which? has also today launched the Consumer Insight tracker, a new online resource providing a uniquely detailed picture of today’s consumers.  The tracker, updated monthly, has data on consumer spending, attitudes and behaviour, and can be filtered by age, income, gender or region. www.which.co.uk/consumerinsight

 

Ends

 

Notes to editors:

*Which? definition of a mortgage prisoner: a homeowner who is stuck in their existing deal and can’t move to another lender because of the following:

  • Falling house values lead to high LTVs (or negative equity)
  • Low wage growth
  • Squeezed household budgets
  • Increasing SVRs
  • Customers who are in arrears
  • Interest-only mortgages.

 

1. The Which? Quarterly Consumer Report: will be published on Tuesday 23 October. It is the second report in a series monitoring how people feel about their current financial situation. It includes the Which? Spending Power Index which tracks month on month changes in consumer purchasing power.

2. Primary research methodology: Populus, on behalf of Which?, interviewed 2,119UK adults online between 14 and16 September 2012. Data were weighted to be demographically representative of allUK adults. Populus is a member of the British Polling Council and abides by its rules.

3. Which? Spending Power Index methodology: Which? and the Centre for Economics and Business Research (CEBR) examined the macroeconomic trends in the British economy and created the Which? Spending Power Index measuring monthly spending power for UK households. The Which? Spending Power Index is constructed as a measure of consumer buying power, calculated by deflating modelled nominal household incomes by household-specific price indices. More information at www.cebr.com

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