Cameron calls on lenders to cushion rate shock

Posted on 12 December 2007 by Charcol

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The leader of the Conservative Party has called on lenders to "step up to the plate" and help borrowers who face a leap in their mortgage rates next year.

It is thought that around 1.4 million borrowers will face a sudden rise in mortgage repayments next year, as their fixed-rate deals run out.

In a meeting with the Council of Mortgage Lenders (CML) yesterday, David Cameron suggested that banks and building societies could raise repayments gradually to help borrowers, and that they should offer financial advice to those affected.

One idea proposed was that borrowers on repayment mortgages could be offered temporary interest-only arrangements.

In response, the CML said that the vast majority of borrowers coming off fixed rates in 2008 would be able to absorb the rise in repayments. The council called on policymakers to find new ways to help homeowners who run into unexpected difficulties such as a sudden drop in income.

CML director-general Michael Coogan said: "The main missing link at present is an appropriate benefits system targeted at those whose circumstances have changed, which has lagged behind what is needed to create a truly effective safety net in a market where home-ownership is the norm."

Research released yesterday by the CML suggested that borrowers have been moving to variable rate mortgages in anticipation of further interest rate cuts next year. Should the Bank of England make further rate cuts, the shock to those coming off fixed-rate deals is likely to be considerably lessened.

Meanwhile, chief secretary to the Treasury Andy Burnham dismissed the Tory leader's comments.

"David Cameron's warm words about social responsibility don't add up to anything, nor can they hide the fact that as recently as this summer he was heaping praise on the report by his Economic Policy Commission that recommended scrapping every regulation protecting people taking out mortgages," he said.

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