The government’s ‘over reliance’ on forbearance measures will make things worse rather than better for struggling homeowners, Target Group have warned.

The company’s managing director Katie Pender says chancellor Jeremy Hunt’s plan is ‘using short-term measures to deal with what is likely to be a mid-term problem’.

“Forbearance is a short-term solution designed to meet issues such as a job loss or a change in circumstance,” she says.

“It is not a mid-term solution to systemic affordability issues triggered by rising interest rates.”

She adds that ‘overreliance on forbearance will ‘come with a cost for the mortgage market as a whole and homeowners’.

“Firstly, paying interest only will prolong the term of peoples’ mortgages, costing them a lot more over the long-term.

“Additionally, it will affect their credit score – therefore harming their future borrowing opportunities and exacerbating affordability shortfalls further.

“In some respects, the market is in a catch-22. Do we try to prevent repossessions, although it’s clear that many people will now not be able to afford their homes, or do we hurt homeowners further down the line by propping up arrangements that may actually be unsustainable?

“The government needs to provide a clearer and more nuanced strategy, otherwise this problem will re-emerge.”

Target Group is working with lenders to help deliver lending services, including forbearance, and Pender believes it’s time to stop market watching.

“We can’t do a 90s style subsidy – the market is totally different now,” she says.

“What’s needed is tax. No one wants to be paying tax, but to curb inflation we need to make people think twice about spending.

“In my view, this means taxing non-essentials, such as flights.

“Of course, this is unfair on the aviation industry which is only just recovering from the crippling effects of the pandemic; but realistically we need to start somewhere and stop people spending.”

Pender says there also needs to be a discussion around affordability stress-testing, as ‘it’s clear that a lot of households have taken on eye-watering levels of debt, which is now really hurting them’.

She says that while the industry has ‘learnt its lesson’ after 2008, another review is needed another review – including looking at schemes such as Help to Buy.

“Watching and waiting is over, she says. “We need to act now to help protect the market.”