“If they sell and property prices have decreased by 10 per cent, then they could potentially owe the bank.
“If the customer refused to sell, then the bank would legally be entitled to repossess which would of course be distressing.”
Laver would like to see a ban on repossessions like in the pandemic, and if a customer has a repayment mortgage he reckons an interest-only mortgage for a year could alleviate some pain in the short-term. The FCA has also recommended lenders use this product in the interim.
Founder of Edinburgh Mortgage, Mark Dyason, said buy-to-let mortgages, especially in the south east, are going to be a “time bomb”.
Terms on five-year fixes used to secure maximum loans at lower rates in areas where properties hold higher values will finish from next year onwards.
“It’s house prices versus rental payments,” Dyason explained.
“If you max the loan then you’ve maxed your mortgage payments, ie, to nearer the rental than is needed elsewhere.
“Then rates go up. Some will find themselves underwater on the new payments and with house prices falling they are losing money in both directions.”
Sales manager at mortgage broker MB Associates, Phil Leivesley, agreed with Dyason.
“In the south east and any other high value areas, a lot of borrowers will have really stretched themselves,” he explained.
“Particularly when prices surged post-lockdown and borrowing was super cheap. It won’t take much of a change to these people’s circumstances, whether that be a reduction in income or an increase in outgoings, for them to be at risk.”
Middle class ‘struggle’
While many may not think of the ‘middle class’ as a vulnerable borrowing demographic, some brokers have pointed out how some families in this wealth category tend to overstretch themselves more than typically vulnerable customers.
Laver, who used to be a fixed income trader in the City, said middle class borrowers tend to have more debt.
“We see families overreaching on credit cards to try and afford holidays. They’ve got their utility bills in the background, and their mortgages which have gone from 1.5 to 6 per cent. All of a sudden, they’re struggling,” he explained.
Leamington Spa-based broker Rachel Dixon said she follows a page for mums on Facebook and that there are “numerous comments” asking for advice on the cost of living and help with mortgage payments.
“These normally are working families,” she said.
