How has the safety net for mortgage borrowers in the UK evolved over recent decades? And how does this compare with the way this has been experienced in other countries?
These are some of the major questions taken up by a new report entitled, Challenges for our Home Ownership Safety Net: UK and International Perspectives. The report was authored by LSE London’s Professor Christine Whitehead and her colleagues, Peter Williams, and Steve Wilcox, and was commissioned by UK Finance, a new trade association which was formed on 1 July 2017 to represent the finance and banking industry operating in the UK.
The report reveals the extent to which help, or a ‘safety net’, for homeowners facing financial difficulty has been scaled back over the past decade. While the government strengthened the safety net for home buyers after the 2008 financial crisis, most of this support has now been withdrawn. Two of the key findings suggest this trend to reduce support will continue. For example, in April 2018 the government is due to stop paying Support for Mortgage Interest as a grant and replace it with a new and less generous form of support – Loans for Mortgage Interest, repayable when the house is sold off and transferred to a new owner. Moreover, by 2022, help for home owners in financial difficulty will be limited mainly to loans to those who do not work. Those with a job, even part-time or low-paid employment will be left to fend for themselves, relying on lenders operating within the legal and regulatory safeguards.
Comparing safety nets from other countries, the report reveals that, while many nations do not provide support specifically for mortgage borrowers, in some cases this is because they already have more generous income support measures in place.
Countries that have been affected deeply by the financial crisis and subsequent recession have responded with emergency policies to reduce evictions, modify mortgage terms, transfer homes into the rental sector, and provide other forms of support. Furthermore, regulation has also been put in place to reinforce economic stability and limit risks posed by financial institutions.
The full length report can be downloaded here.
News coverage of the report:
- This is Money, Sarah Davidson: Thousands more households in danger of losing their homes after switch to universal credit as critical safety net is removed, banks warn
- Best Advice, Kevin Rose: Homeowners’ safety net has been eroded
- Mortgage Introducer, Michael Lloyd: UK Finance: homeowners are seeing safety nets disappear