HM TREASURY News
Release (PN/09/0009) issued by COI News Distribution Service. 6
February 2009
The Government is
today launching a consultation document on strengthening
protection for vulnerable homeowners. The Government is proposing
that companies offering sale and rent back agreements, which may
target homeowners facing repossession, should be brought within
the scope of Financial Services Authority (FSA) regulation. The
consultation sets out the details of the proposed legislation and
will close on 1 May 2009. The FSA has published a separate
consultation alongside on the detail of its proposed new regime,
available at: http://www.fsa.gov.uk/Pages/Library/Policy/CP/index.shtml.
The consultation follows an Office of Fair Trading (OFT) market
study published at the end of last year, which looked at the
impacts of the growing sale and rent back market. The OFT report
identified that there are a number of risks to homeowners entering
into these arrangements and made three recommendations to
Government, including compulsory regulation, increasing consumer
awareness and improving information about housing benefits.
The Government accepted the OFT's recommendations. Its
proposals today include a two-stage approach to regulation, in
order to ensure consumers are protected as quickly as possible in
the current market environment. Subject to the outcome of
consultation and Parliamentary approval, the Government is
proposing that the FSA puts in place an interim regime by July
2009. The FSA will put in place its full regulatory regime
following consultation and the publication of its final rules. The
launch of the consultation today follows action taken by the OFT
last week asking 16 sale and rent back providers to substantiate
claims made in their adverts.
The Government's proposals build on the comprehensive
package of support for homeowners facing financial difficulties.
The Chief Secretary to the Treasury, Yvette Cooper, said:
"Many people are worried about their homes and their
mortgages right now. Unscrupulous companies must not be allowed to
exploit people when they are vulnerable with dodgy deals that end
up pushing people out of their home. The OFT found some shocking
cases. That's why in this consultation the Government is
proposing tough new regulation to give vulnerable homeowners
better protection when they need it"
Housing Minister, Margaret Beckett said:
"We are determined to give as much support as possible to
home owners who maybe facing difficulties right now. These new
proposals will help to protect vulnerable consumers at risk from
unscrupulous companies seeking to exploit households in the
current climate. This is part of the wide range of actions we are
taking to restore stability and confidence in the housing market
and to ensure real help is in place for those who need it most."
Notes for Editors
1. The sale and rent back (also known as sale and lease back)
market offers homeowners the option of selling their properties at
discounted rates in exchange for tenancy arrangements. Sale and
rent back agreements effectively combine two transactions -
firstly, individual homeowners sell their property at a discount,
and secondly they are offered an agreement to remain in the home
as a tenant.
2. At Budget 2008, the Government asked the Office of Fair
Trading (OFT) and the Financial Services Authority (FSA) to
investigate the sale and rent back market, focusing on
consumers' experience of these arrangements, and consider
options where appropriate to strengthen consumer protections. On
14 May the OFT announced that it would conduct a formal market
study, working to an expedited timetable in light of stakeholder concerns.
3. The OFT published its report on the sale and rent back market
study on 15 October 2008: http://www.oft.gov.uk/advice_and_resources/resource_base/market-studies/current/saleandrent
4. The Government published its reponse to the OFT market study
on 22 October 2008: http://www.hm-treasury.gov.uk/press_108_08.htm
5. The OFT announced it had taken action in relation to
advertising by sale and rent back providers on 30 January: http://www.oft.gov.uk/news/press/2009/08-09
6. The Government published its consultation on regulating the
sale and rent back market on 6 February 2009: http://www.hm-treasury.gov.uk/consult_sale_rent.htm
7. The FSA published its consultation on the details of an
interim regulatory regime for the sale and rent back market on 6
February 2009: http://www.fsa.gov.uk
8. The Government is taking a range of other steps to support
homeowners and help them avoid repossession including:
* Statutory regulation of mortgages and credit provides
homeowners with important protections and appropriate means of
redress. In 2004 the Government extended the scope of FSA
regulation to cover first charge residential mortgages. The
FSA's regime requires that lenders only move to repossession
as a last resort. Regulation of other credit business is covered
by consumer credit legislation, administered by the Office of Fair
Trading (OFT).
* In the 2008 Pre-Budget Report, the Government announced the
creation of a new Lending Panel bringing together Government,
banks, trade bodies, regulators, and consumer groups to monitor
lending to businesses and households. The major mortgage lenders
on the Panel have agreed to a moratorium on repossessions -
committing not to repossess for at least 3 months after an
owner-occupier falls into arrears. Some mortgage lenders have now
gone further, and committed not to repossess for at least 6 months
after an owner-occupier is in arrears. The Government welcomes
these commitments.
* The Government's recently announced Mortgage Rescue Scheme
and Homeowner Mortgage Support Scheme, together with recent
changes to make Support for Mortgage Interest (SMI) more generous,
will help to ensure that homeowners who experience a temporary
income shock, lose employment, or are otherwise vulnerable, are
able to remain in their homes. Information on the mortgage rescue
scheme, including the eligibility criteria, can be found at: http://www.communities.gov.uk/housing/buyingselling/mortgagerescuemeasures/.
Information on the Homeowner Mortgage Support Scheme can be found
at: http://www.communities.gov.uk/housing/buyingselling/mortgagesupportscheme/.
Information on Support for Mortgage Interest can be found at: http://www.dwp.gov.uk/mediacentre/pressreleases/2008/dec/hse116-191208.asp.
* The Government is determined to ensure that every household
struggling with debts can access free and impartial debt advice.
In the Pre-Budget Report 2008, the Chancellor of the Exchequer
announced £5.85m additional investment in telephone advice during
the period to March 2011, and £10m to March 2010 for Citizens
Advice bureaux to expand face-to-face debt advice capacity. Both
measures will help to ensure that advice and support is available
for borrowers who may need it.
Non-media enquiries should be addressed to the Treasury
Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk
This Press Release and other Treasury publications are available
on the HM Treasury website hm-treasury.gov.uk For the latest
information from HM Treasury you can subscribe to our RSS feeds or
email service.