CCCS Call for Exam for First Time Buyers

by Mark Johnston

A debt charity has spoken out suggesting that Banks and Building Societies should only be given the first time buyers after they study for and then pass an exam.

Malcolm Hurlston, the chairman of the Consumer Credit Counselling Service has spoken out saying that mortgages should be sold with a health warning instead of tax breaks. He was concerned that increasingly first time buyers are buying a house too soon which results in spiralling debt problems that they cannot get out of.

Mr Hurlston raised his concerns in a speech he made recently to members of the credit industry which included Banks and Building Societies that have been affected byt the recent credit crunch. During the speech he spoke about how the crisis had changed the financial system and that new ways of looking at credit scoring and loan approval should be explored.

The chairman of the Consumer Credit Counselling Service suggested that first time mortgages should be approached the same way as being able to drive. Prospective customers would be required to study for an exam which would give them the knowledge and tools to make informed choices. Anyone unable to pass the exam would not qualify to be able to even apply for a mortgage let alone be accepted.

Mr Hurlston said: “The people most likely to get into debt in Britain are those on low incomes who have wrongly or too soon embarked on home ownership,”

“Think Northern Rock. Was it not apparent to everybody here that 110/120% mortgages, some partially disguised as unsecured, were dangerous madness?”

For many first time buyers being able to get on the property ladder is a dream come true but all too often it turns into a nightmare as bills spiral homing a home becomes a trap especially when house prices fall, if becomes almost impossible to get out of the situation.

The Consumer Credit Counselling Service are starting to see a need for some sort of exam or test. First time mortgages are being “sold with pretty ribbons and tax breaks instead of health warnings”. He called for some form of exam to be introduced for those on low incomes that are thinking of getting a mortgage and took to the US model for inspiration.

During the speech Mr Hurlston called for the current city regulator, the Financial Services Authority (FSA) to put new rules in place for first time buyers which would force lenders to adopt a  sort of home ownership certificate that would be required by anyone wanting to purchase a property for the first time.

Although first time buyers are now asked to provide a lot more in terms of evidence for affordability they do not need to prove any sort of understanding of how mortgages work or what is expected of them before a home loan can be agreed.

The United States have already adopted a policy where those on low incomes who are looking for a mortgages are offered free or very low cost advice on how to buy a home, renting, credit and debt issues. During 2007 1.7 million households in the US took advantage of this programme and received housing education.

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