The hearing covered the mortgage stress faced by borrowers, the response to people falling behind on repayments and the wider impact on the UK housing market.
MPs were told that increasing mortgage rates are causing financial stress to customers, and that the situation will worsen. But lenders also reported that they have not seen a significant pick-up in arrears yet.
Lloyds Banking Group homes director Andrew Asaam said the number of customers in arrears remained low and below pre-Covid 19 levels but that there had been a small increase.
Bradley Fordham, mortgage director at Santander UK, told the Treasury Committee the bank had seen a “small tick up in arrears, still 20% below pre-pandemic, 70% below 2009 post-financial crisis, so relatively low levels”.
He also pointed out that mortgage customers coming off deals and going onto new ones were seeing payment increases of “over £200 per month”.
But, the UK could be approaching a ‘tipping point’ where mortgage rates rise to levels where borrowers cannot fully protect themselves by extending the terms of their loans or moving to interest-only deals.
Paresh Raja, CEO of MFS, offering his view on what can reasonably be expected from lenders in the current climate, insisted that lenders should not be blamed for increasing rates; given their hands have been forced by the 13 consecutive hikes to the base rate – with more expected.
Where criticism can be levied, however, is the frequency at which rates are changing and products are being pulled.
He said: “Lenders cannot be blamed for increasing rates; their hands have been forced by the 13 consecutive hikes to the base rate, with more expected. Where criticism can be levied, however, is the frequency at which rates are changing and products are being pulled.
“It is no surprise that borrowers – and brokers, it should be acknowledged – are experiencing stress over securing a mortgage for a property purchase. They must feel as products are here one minute, gone the next.
“Lenders can combat this issue by offering greater assurances over how long a particular product will be available for applications, and generally improving their communication with regards to how they are navigating the current economic landscape. This is where more agile lenders in the specialist finance sector seem be excelling, and it is no surprise that bridging loan applications have experienced an uptick in demand in 2023 amid a somewhat chaotic mortgage market.”