Treasury calls on mortgage lenders to help debt sufferers
The HM Treasury Committee has called for banks and the Financial Services Authority to ensure homeowners are not facing unfair charges on mortgages.
Research by the government organisation shows that more people are suffering from mortgage arrears and repossession of their homes because they are struggling to keep up with repayments in the tough economic climate.
While most of the members of the mainstream lending industry are taking positive steps to reduce the number of debt and repossession cases, the Mortgage Arrears and Access to Mortgage Finance report showed that some are not.
It accused sub-prime, specialist and second charge mortgage lenders of using repossession as a first resort rather than a last one, which could increase the number of families being left homeless.
John McFall, chairman of the committee, said: "Losing the family home is one of the most distressing experiences a family can go through. We have heard harrowing tales of households struggling to keep their heads above water in an attempt to avoid repossession.
Some mortgage lenders are also charging rates which perpetuate debt and ensure that those with spiralling arrears have a hard time escaping.
The Treasury wants the FSA to be stricter with its regulations and enforcement of rules.
Mr McFall continued: "We suspect that the small number of cases being brought against lenders making excessive arrears charges are merely the tip of the iceberg.
"This is why it is so important that lenders are compelled to open up their books and justify their charges, while the FSA must be prepared to take decisive action where it finds evidence of wrongdoing."
Despite the risks associated with such lending, Nationwide Building Society recently introduced a new mortgage to the market with a market-leading loan-to-value of 125 per cent.
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