UK lenders told by regulators to ‘step up’ amid soaring mortgage rates

(Alliance News) – Lenders need to ‘step up’ to help homeowners facing surge in mortgage rates, a senior UK financial watchdog official said.

Richard Lloyd, interim chairman of the Financial Conduct Authority, said he was monitoring banks “closely” to ensure they meet regulatory standards during the cost of living crisis.

He told the finance committee: “Of course we are concerned about the state of the (mortgage) market.”

“This is in a way that people haven’t experienced in the housing market for a while, and it’s incredibly stressful for individuals, for their mental health and finances.

“So we really need lenders to step up.

“We are ready to do more, but at the moment we are at a stage where we are very clear to lenders what kind of standards we expect.”

Lloyd explained that this includes certain expectations about how people will be treated when they are in financial difficulty, and the need for effective communication and coordinated support. did.

FCA Chief Executive Officer Nikhil Rathi emphasized that young people aged 18 to 30 who have made their first purchases in recent years are particularly at risk.

“Often, they will stretch themselves to buy property,” he said.

“They may have a fixed rate mortgage between 2% and 2.5%, and when that expires they may be looking at a very high interest rate of 5% or more.

“This is part of the market that needs to be monitored very carefully.”

The remarks came as average two- and five-year fixed-rate mortgages topped 6% for the first time since 2008, following the former prime minister’s mini-budget that sparked volatility in financial markets.

This means that homeowners could face much higher mortgage rates when their current contracts expire, leading to fears that more borrowers will accumulate more debt than they can afford to pay back. It’s causing concern.

But Rathi told the finance committee, which was scrutinizing the regulator’s leaders, that the UK is in a much more resilient time than during the 2008 financial crisis.

“I don’t think we are in the same situation as we were ten years ago,” he said.

“We have the lowest number of delinquent customers since 2007.

“While we do not underestimate how serious the situation is and how difficult this period will be for consumers across the country, we face this situation in a much more resilient position than in previous cases. ”

He added that there are important interventions lenders can take to help struggling mortgage owners, such as offering grace leave, extending the mortgage term, or reconsidering early repayment fees. .

Both the consumer and the bank would be far better off helping customers find their feet than having to get their homes back.

The two leaders emphasized that the FCA is working hard to ensure that the UK does not fall into a crisis like the financial crisis.

Rathi acknowledged that there are “pockets of bad habits” in the industry, but watchdogs are taking action to ensure misbehaving companies “get themselves sorted out.”

Anna Wise, Pennsylvania Business Reporter

Source: P.A.

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