Examination of Witnesses (Question Numbers
30 JUNE 2009
Q89 Chairman: Welcome to the second part
of our session. Can you introduce yourselves for the shorthand
Ms Bennett: I am Jackie Bennett.
I am Head of Policy at the Council of Mortgage Lenders.
Mr Coles: I am Adrian Coles, Director-General
of the Building Societies Association.
Mr Leenders: Eric Leenders, the
Executive Director responsible for retail banking at the British
Mr Socha: John Socha, Vice-Chairman
of the National Landlords Association.
Mr Williams: Peter Williams, Executive
Director of the Intermediary Mortgage Lenders Association. That
is the trade body for lenders who lend through intermediaries.
Q90 Chairman: Welcome. I will put
my first question to the Council of Mortgage Lenders. We heard
in the first session about the forecast by the economist, Ian
Shepherdson that repossessions will hit 100,000 to 120,000 by
2011. Are your figures at variance with that?
Ms Bennett: We have only put out
a forecast for 2009, we have not predicted forward, partly because
we think it is too uncertain in terms of what happens in the economy,
what happens with unemployment, for us to be able to make that
forward prediction. Would you like me just to run through that?
Q91 Chairman: Yes, sure.
Ms Bennett: In terms of our forecast
for 2009 we originally had a figure of 75,000 possessions for
this year but we have actually revised that downwards to 65,000
for this year as a result of lower interest rates which is enabling
people to be able to work with their lenders to stay in their
homes. Also, as a result of lender forbearance, which is increasing,
lenders are keeping more people in their homes, and as a result
of Government initiatives which are encouraging more people to
engage with their lenders or with money advice which, again, is
enabling people to work together to be able to stay in their homes.
As I say, we have revised that forecast down this year.
Q92 Chairman: I have got a couple
of points from that. Unemployment is predicted to rise sharply
over the next few months, say, and some people are talking about
three million unemployed and, indeed, the departing MPC member,
Danny Blanchflower, is saying by 2012 it could be four million
unemployed. What would be the impact of an increase in unemployment,
say first of all to three million, on the number of households
in mortgage arrears and being repossessed?
Ms Bennett: We have not done that
calculation. As I say, we restricted ourselves to looking at what
might happen this year. We have indicated in our forecast document
that if unemployment does continue to rise as predicted that will
have a knock-on impact on arrears and possessions potentially
going forward effectively worsening the position. There are obviously
other factors at play here and we have not done that "If
you get three million unemployed, what number of possessions would
that equate to?" We simply have not done that calculation.
Q93 Chairman: Are there any comments
about how sensitive the levels of repossessions will be to the
Ms Bennett: We believe that it
will be a combination of factors. Unemployment is clearly a key
driver, and we believe not just unemployment but other factors
around things like people will not get the overtime or the bonuses
that they are expecting, perhaps will not get the pay rises they
are expecting, and that will all feed through into that. Interest
rates is clearly a factor. Lenders are telling us that because
of the lower interest rates people are more able to make their
payments. Moving people to something like interest-only is a much
more realistic option at the moment because interest rates are
so low. Again, a combination of higher unemployment, reduced unemployment
and higher interest rates would have a serious effect potentially
on arrears and possessions.
Mr Williams: If I may, Chairman,
all of us would take the view that lower interest rates have been
an absolutely key factor in keeping the lid on arrears and possessions.
If interest rates begin to rise that is clearly a factor alongside
unemployment, and I think in all the submissions that have been
put in to the Committee there is a general view that next year
it is possible that numbers will go up, it all depends on sets
of circumstances. The most important factor going forward is restoring
a normal mortgage market, a normal housing market, which allows
households to trade out of their difficulties. In reality, of
all the schemes that have come into play, the one that is most
effective for most people is simply trading in the market.
Q94 Ms Keeble: I wanted to ask about
mortgage lenders' behaviour. You heard the comments in the first
half about the level of fees which are being charged for managing
arrears. What is your comment on them because some of the levels
are quite outrageous?
Mr Coles: Someone mentioned that
Nationwide ended charges as soon as an agreement had been reached
with the borrower and, in fact, that is general policy across
the entire building society sector. I would argue that building
societies especially are not guilty of the crime that is being
suggested. I suspect most mainstream lenders would also come into
that category, not just building societies.
Q95 Ms Keeble: Let us hear from CML
and then look at some of the evidence.
Ms Bennett: In terms of the wider
mortgage market it is certainly included in our industry guidance
that it is good practice if somebody is in an arrangement to pay
that they should not be charged a fee for that arrangement. There
is a case that lenders are allowed under the same rules to charge
a fee for the additional work that having somebody in arrears
can cause. There is a balance to be struck because if that cost
is not borne by those people who are in arrears it has to be passed
on to the wider population, so everybody's mortgages would be
Q96 Ms Keeble: Some of the evidence
that was given earlier was that one firm was actually recouping
its advertising fees through these charges, so it was not the
case that what was being recouped were costs that would have otherwise
gone to the general population.
Ms Bennett: That is something
which the FSA is investigating.
Q97 Ms Keeble: Is the FSA investigating
Ms Bennett: Yes.
Q98 Ms Keeble: Do you know which
organisation that is?
Ms Bennett: No, I do not.
Q99 Ms Keeble: It is a bank presumably,
Ms Bennett: We do not know. They
have not said. They have simply said it is four firms they are
looking at for enforcement action and one of the issues they are
considering is the charges that lenders make for people in arrears.