Mortgage News

Difficulties faced by subprime mortgage borrowers "unsurprising" - 12/12/2007

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A trade body for the mortgage lending sector has stated that it is unsurprising that subprime borrowers are more likely to face financial hardship.

In response to the newly released Citizens Advice report - Set Up to Fail - which criticises the subprime sector for failing to protect the interests of its vulnerable customers, IMLA has claimed that lenders are not solely to blame.

"Unsurprisingly borrowers with credit problems are more likely to get into difficulties," said IMLA's executive director Peter Williams, adding that lenders have a "clear vested interest" in minimising the costly processes involved with arrears and repossessions - this latter option said to be a "last resort" for lenders.

While describing the Citizens Advice report as sensible, Mr Williams said that it is hampered by "sweeping generalisations" based on a minority sample weighted towards borrowers already facing financial hardship.

However, the executive director acknowledged that the system could be improved, citing the complications resulting from the different regulatory frameworks for first and second charge loans as one area that could benefit from reform.

Borrowers should be treated with consistency by the courts and the benefits system should offer swifter financial support to claimants facing repossession, he added.

Citizens Advice asserted in its report that the government's initiatives to boost home ownership must be accompanied that tough regulatory enforcement.

© Adfero

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