Mortgage lenders 'must be more innovative'

Mortgage lenders and the finance industry have got to be more innovative to help people onto the housing ladder, rather than locking people into massive cycles of debt and the danger of repossession, the UK's largest housing and regeneration group has today warned.

Places for People, which is responsible for 58,600 properties across the UK, is calling on the sector to introduce greater financial flexibility and support, rather than simply increase standard income multiples to cover mortgage borrowing costs.

The news comes after an Abbey national survey found that over 7.4 million people cited rising house prices as the main reason for not being able to step onto the property ladder, leading them to increase the rate at which people can borrow to up to five times their income.

In July 2006, Places for People launched a range of financial products to its customers, including personal and small business loans and mortgages, in a bid to increase home ownership and also prevent people relying on high interest doorstep credit lenders.

It is the first time a housing organisation has directly offered its customers mortgages, and the first mortgage sale is expected to be completed within the next three weeks.

This is one of a number of finance products and options that the Group is now offering to help its customers purchase the share in their homes that is appropriate to their financial situation.

The Places for People mortgage, being offered in partnership with the Cooperative bank, allows customers to 'staircase' up and down, so they are able to reduce their mortgage, or sell the property back to Places for People and become a tenant, should their financial situation change and they are not able to meet the mortgage payments – so enabling them to remain in their own home and not have the property repossessed.

David Cowan's, chief executive of Places for People said: "Since 1997 we have seen over 1million homeowners climb onto the property ladder - yet there are millions more who are deterred from doing so because of rising house prices and a lack of suitable and affordable accommodation.

"The finance sector should be offering a greater range of flexible finance products to give customers choice, and then be ready to support them and be flexible should they experience changes to their financial circumstances."

"By offering people a greater choice of home ownership and flexible finance packages the mortgage sector can help give people choice about how they manage their finances, thus helping strengthen communities and creating vibrant sustainable neighbourhoods."