The creature spawned to counter this threat undermines advisers who historically played a positive role in rationalising people’s affairs.
Quoting occasional abuses to justify this underlines the lack of judgement that led to this situation.
We have a situation where the client – who cannot buy, or retain, a house because of the current income constraints – is forced into paying rent significantly higher than the mortgage.
Government should consider stepping in when difficulties arise, making payments allowing borrowers to retain their property. This assistance should be at a realistic cost. Help in retaining the house should cost some equity. If, for example, 1 per cent of the equity were surrendered for each mortgage payment, this would concentrate minds wonderfully.
The safeguard would, however, avoid the trauma of families moving to rented property, the disruption in schooling, other aspects of family life and avoid stress on lenders. The scheme could be scaled so, if half the monthly payment was made, the loss of equity would be proportionate – that is 5 per cent. Equity could be reclaimed in future years when the borrower’s circumstances allowed.
A minimum of, for example, 4 per cent, could be established, offering assistance only above this level. Loss of equity ensures borrowers treat this scheme as a last resort.
However, it avoids the terrible financial and social cost of repossession. The removal of stress would increase the wellbeing of many. We need regulators seeking positive solutions, not penal and draconian edicts.
John West
Senior partner
West Highland Finance Consultants
Inverness
