An all-party group of UK politicians is calling on the Treasury and the Bank of England to take radical steps to stop people losing their homes.

The all-party group (APPG) invited a panel of leading experts in mortgage policy to discuss the key issues in the UK mortgage market.  With interest rates expected to rise further in 2023 the APPG argues that regulatory reform is needed to ensure that mortgage lending is based on affordability rather than arbitrary caps. And it says reform is needed to ensure that people who can afford to repay a mortgage are able to get one.

The need for a single mortgage regulator

The APPG also argues that mortgage regulation needs to be streamlined under a single regulator. It says that the Treasury and regulators need to talk to a much wider pool of lenders rather than just the same big banks.

Karen Bradley MP, Chair of the APPG on Challenger Banks and Building Societies said: “Due to rapidly rising interest rates the UK housing market is at a turning point.  We can either decide to carry on with the “business as usual” approach as people struggle with rising interest rates or do something different.

“In countries like Denmark and Holland consumers are not exposed to the vagaries of the financial markets when it comes to a mortgage on their home as many mortgages are at a fixed rate for life.

Root and branch mortgage policy review

“The APPG is of the view that UK mortgage regulation needs a root and branch review with a view to introducing some of the protections common in other nations.  There is also a need for greater competition in the mortgage market and a slim lined regulatory system under a single body.

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“Why should UK consumers be uniquely exposed to market fluctuations when in the Netherlands or Denmark the public are protected by fixed for life mortgages?  There must be, and is, a better way.”

Arjan Verbeek, CEO of Perenna, added: “The UK mortgage market is broken and creates vulnerabilities for borrowers and the UK economy.

“As other countries have shown, there are better ways to design a mortgage system. One which protects borrowers from the vicious cycle of interest shocks and expensive re-mortgages. And one that helps first time buyers onto the ladder and provides options to later life borrowers. This is becoming critical as the UK continues to age, and, finally, support the retrofit challenge.

UK mortgage market: ‘unique challenges’

“As long as the Government continues to listen to the same voices, nothing is going to change. The APPG is absolutely right to say the Treasury needs to consult more broadly. Many of the problems the UK mortgage market faces are unique.  Other countries don’t have them. And there is absolutely no reason why we can’t get to that same place too.”