One in four worried about having their home repossessed
Which? is calling for the Treasury to put tougher obligations on banks taking part in the Funding for Lending Scheme.
The watchdog wants the government to ensure lenders that have been given access to cheap finance pass this on through lower borrowing costs to help all borrowers, not just those with significant equity.
New research from Which? Has found that half the population are worried about mortgage rates and a quarter (26%) of people with mortgages fear having their home repossessed.
The Which? Quarterly Consumer Report, reveals a fragile housing market dividing the nation. An increasing gap is developing between older, more financially secure homeowners and those who are struggling, namely those who are aged 30-49 who bought their homes recently and younger people who can’t get on the property ladder.
Many people in the 30-49 age group are ‘mortgage prisoners’ trapped in their current mortgage deal, unable to switch when rates increase.
This could be due to a number of reasons such as the value of a borrower’s home has fallen leading to high LTVs or even negative equity, customers are in arrears or have interest-only mortgages.
Which? says other factors could also include low wage growth, squeezed household budgets and increasing standard variable rates (SVRs).
The 30-49 age group has the greatest housing related costs, spending on average £186 a week, compared with the national average of £135.
The Quarterly Consumer Report also reveals that home ownership is increasingly out of reach for first-time buyers with rising rents making it harder for people to save for the large deposits needed.
More than half (54%) of people under 30 who don’t own a home are worried about getting on the property ladder.
Lenders have also increased mortgage arrangement fees, which have risen by around 60% in the past 18 months to an average of £1,472 in August 2012.
Which? says that its findings, reveal the depth of problems in the housing market, and come at a time when banks and building societies are being given access to cheap funds through the government’s Funding for Lending Scheme.
However, more than 1.6 million people with mortgages have been hit by increasing SVRs on their mortgages, meaning they are now paying about £400 million a year extra despite the Bank of England base rate remaining unchanged for more than three years.
Which? executive director Richard Lloyd, said: “The housing market is failing not just one but two generations of consumers, with many mortgage prisoners trapped on their current deal and young people excluded from the housing market altogether.”
“The chancellor must put tougher obligations on banks that get cheap finance through the government's Funding for Lending Scheme so that more is done to help those who are struggling through no fault of their own, and especially to ensure that mortgage prisoners and first time buyers can benefit from lower borrowing costs."
Which? has also launched the Consumer Insight tracker, a new online resource providing a uniquely detailed picture of today's consumers. The tracker, updated monthly, has data on consumer spending, attitudes and behaviour, and can be filtered by age, income, gender or region. www.which.co.uk/consumerinsight