Consumer Focus is warning that targeted Government help is urgently needed for right-to-buy homeowners, as new research shows they are likely to be at much greater risk of losing their homes due to financial difficulties in the recession.
The consumer champion’s new research reveals that right-to-buy mortgage-holders are twice as likely than others to have had problems paying their mortgage in the last three months – with almost one in 10 affected.¹ Right-to-buy owners with mortgages are also fifty percent more likely to have additional mortgages or loans secured on their homes.² The watchdog is warning this is likely to increase the risk of repossession for many vulnerable households.
There are no official statistics on repossessions based on additional secured loans. However, according to Finance and Leasing Association figures³, the number of re-possessions by their members based on second-charge lending was 1,588 in 2008, up 33% on 2007.
Previous Citizens Advice research has shown that many right-to-buy borrowers are susceptible to irresponsible lending practices, which may put their homes and wider finances under greater threat. Their research also showed that many such mortgage-holders often weren’t aware of the full impact buying their home would have on their finances, such as housing benefit not being available to pay their mortgage.
Jonathan Stearn, Consumer Focus debt expert, said: ‘Right-to-buy homeowners often live on low incomes and many will be very vulnerable. So, it is extremely worrying that our research has shown they are likely to be at much higher risk of losing their homes. ‘The government must ensure people go into right to buy with their eyes fully open to the impact this might have on their rights and finances, and provide the level of help and support needed if they get into difficulties. Lenders should also be obliged to lend in a responsible way that takes account of the needs of right-to-buy consumers.’
Consumer Focus is calling on the Government to implement a raft of measures to help right-to-buy homeowners as a group particularly at risk of repossession in the current financial situation. Early intervention would not only help the individuals affected, but could also have considerable cost savings for local and central government by reducing the numbers needing emergency homelessness assistance and council or other social housing.
Key measures Consumer Focus is calling for are:
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Additional safeguards from the Financial Services Authority and Office of Fair Trading to protect right-to-buy homeowners from inappropriate lending, including a thorough assessment of affordability and improved customer support
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All consumers considering right-to-buy to receive independent advice on the financial and legal implications, particularly around the benefits they may lose
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A national and local-area based awareness campaign on the help and advice available for right-to-buy homeowners having difficulties meeting mortgages and other loans
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Additional funding for local debt advice providers to cope with increased demand
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Legal curtailment of lender’s repossession rights if money has been lent irresponsibly, their arrears policy managed ineffectively or regulatory requirements have been broken
ENDS
1. Face-to-face research conducted on Consumer Focus’s behalf by TNS in March/ April and May 2009 with 4,238 individuals, of whom 185 were right-to-buy mortgage-holders. Nearly one in 10 (eight percent) of right-to-buy mortgage-holders had difficulty in making, or missed a mortgage payment in the last three months. This compares to less than one in 20 (3 percent) of other mortgage-holders.
2. Consumer Focus / TNS research March – May 2009. Six percent of right-to-buy mortgage holders have at least one other mortgage or loan secured on their home, compared to only four percent of other mortgage-holders.
3. Finance and Leasing Association figures, February 2009.
4. Set up to fail report, Citizens Advice, December 2007.
Factfile:
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There were 12,800 repossessions by first-charge mortgage lenders in the first quarter of 2009 according to the Council of Mortgage Lenders, compared with 8,500 in the first quarter of 2008
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The number of loans with arrears of more than 2.5% of the mortgage balance rose by 62% from 127,000 in the first quarter of 2008 to 205,300 in the first quarter of 2009
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More than 1.8 million people bought under the right-to-buy scheme by August 2008
