Last month, a debt charity called for first time buyers to take a ‘mortgage exam’ before being allowed to apply for a mortgage. Since then, the debate has increased with some stating it is unrealistic and others pointing to a US program that offers something similar.
Speaking at the Consumer Credit Counselling Service (CCCS) annual convention in Bristol last month, chairman Malcolm Hurlston warned that the Financial Services Authority (FSA) has a responsibility to learn from the credit crisis and ensure that those applying for first mortgages understand the implications of a mortgage, arrears and debt by taking some sort of exam – not unlike the CeMAP exam that every mortgage advisor must take before offering mortgage advice to the general public.
He called for the next government to insist upon following the US example of offering pre-mortgage education and counselling. Mr Hurlston said:
“Home ownership is a lifestyle choice but a trap for many. First-time mortgages should be sold, not with pretty ribbons and tax breaks, but with health warnings. They should be sold like driving licences, after study and an exam.”
Mortgage advisor Jock Cassidy, director of Ashley Law Ltd, has this week said the idea of a ‘consumer mortgage exam’ is ‘unrealistic’ and added:
“The idea of offering education is good, but to make first-time buyers pass an exam before they are entitled to a mortgage is unrealistic. Let us get real here – if you are taught how to service a car, the reality is that when you need to actually put your knowledge into use three years later when something goes wrong with your car – you are going to forget what to do. And I believe a similar thing would happen with the mortgage exam as real life always gets in the way.”
A representative from the Council of Mortgage Lenders (CML), Sue Anderson, believed lenders may consider the proposal as there was certainly a case for increasing knowledge about credit but the recent debate had raised the question of whether this is what the consumer wants and whether or not it would make a real difference to the number of homeowners falling behind on repayments.
Many of those who do fall behind on repayments have done so because their circumstances have changed for example, because of redundancy.