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Mortgage arrears: follow up - Treasury Contents

Examination of Witnesses (Question Numbers 40-41)


23 MARCH 2010

  Q40  Jim Cousins: Where are the ideas for this?

  Ms Hughes: There is lots of academic work on the subject. I think that through partnership with advice agencies, with lenders and, of course, with public consultation lots of ideas can be generated. I think there are lots of different aspects to the safety net. One side is making sure that there is always advice available for people when they need it; that the processes in regulation and in the courts are effective.

  Q41  Jim Cousins: Can I stop you there, because the implication of what you are saying is that we are looking at a residual group of people that we so charmingly classify as subprime. We are not, in fact, looking at a residual group of people. We are looking at an aspect of the way the housing market is now going to work in the present kind of economic situation in which very large numbers of people are going to experience quite volatile changes of circumstance or quite volatile changes of income, and there needs to be a non-judgemental, non-loaded with stereotype system of supporting them through those situations.

  Mr Tutton: There are perhaps some things that could be done quickly. In the situation you describe the whole system of support for home owners does not take into account that people will have flexible labour markets, that their incomes are going to go up and down, particularly lower income families, work will come and go. One of the things that is missing from the FSA Mortgage Market Review is this idea about how far do you embed forbearance? At the moment they are going to make lenders offer a wider range of options, but it is not going to say, "Actually, this is how much help you have to give someone for this long." One of the big questions that is going to come up in terms of a possible second wave of repossessions is will lenders get forbearance fatigue and at what point should they be allowed to. So that is part of the question. Again, in the courts at the moment it is very much a snapshot of people coming in. If you have lost your job, you come before the court and they are looking at a snapshot of your circumstances, but if you take a view that these are long-term products and if you are going to have people with up and down incomes they might need more time to recover, then we need the courts to have more power to look at those things. There are things that can be done quite quickly and quite easily that will give more help to borrowers who are more likely to have variable incomes, more likely to face unemployment shocks and, particularly where we are now, people may get back into work, back into work at a lower income, they might fall out of work again, get back into work, so I think we can do something there. In the long-term, as Nicola said, it is about looking at a position of "we wouldn't start from here". Can we get the safety net to work, the articulation, for an insurance, which has not worked particularly well, between what the state pays through the benefit system, what lenders pay and what borrowers pay? We need to get that thought out in front rather than in the middle of a recession where we are now.

  Chair: Thank you very much for your evidence.

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