Labour wants mortgage lenders to be required to advise borrowers about potential interest rate changes and the possible impact they could have on the affordability of their mortgage.
Shadow Treasury financial secretary Chris Leslie has put the idea forward as an amendment to the Financial Services Bill. It calls on the Government to being forward concrete proposals for the move within six months of the bill becoming law sometime later this year.
Today sees the last session of the public bill committee currently debating and voting on amendments to the bill.
Speaking to Money Marketing, Leslie says: “Most homeowners will not want Government intervention or direct assistance, but would welcome some scenario planning tailored to their particular circumstances from their mortgage provider. Just as in Sweden where taxpayers receive an orange envelope with predictions for their pensions, the Government should require mortgage lenders to forewarn customers about the possibilities of interest rate changes that might be around the corner.”
Leslie says the move is necessary because despite the fact the base rate has been at 0.5 per cent for the past three years, it can move unexpectedly.
He says: “If the rate goes up in the coming years we might face a major problem of repossessions, which would have a tragic impact on people’s lives and hit families across the country. The Government should stop being complacent and act urgently to prevent those with mortgages from being caught off-guard.”
Without backing from Government MPs the amendment will not be passed. However, it could be revisited in the next stage of the bill’s passage through Parliament, which is likely to take place next month.
The amendment says: “The Treasury shall bring forward recommendations within six months of RA of this Act regarding requirements for mortgage lenders to forewarn existing customers about potential rate changes on the affordability of their mortgage repayments.”