Mortgage lenders must not rely solely on the Mortgage Market Review's affordability testing to prevent customers falling into arrears, a mortgage servicer has warned.
Nigel Turner, chief commercial officer at HML, said more new borrowers were taking out mortgages thanks to the arrival of the government's Help to Buy scheme but increasing interest rates would pose a problem for the market.
He warned despite the arrival of tougher lending criteria under the Mortgage Market Review ‘unexpected events' would continue to occur regardless.
"With the extension of the Help to Buy set to help thousands of people on to the housing lender, lenders should not rely on the Mortgage Market Review's stress testing and income and expenditure forms to ensure loan affordability," he said.
"Major customer life events and other unexpected scenarios can still occur, and it is imperative that lenders plan for these now and ensure they have the culture, processes and strategies in place to deal with these to ensure the best outcomes for customers."
HML said the FCA checklist for lenders required them to take proactive steps to identify those borrowers susceptible to the risks involved with potential interest rate rises and have strategies in place to deal with these borrowers fairly.
The regulator also wants firms to invest in their people and systems to ensure the fair treatment of customers based on their specific financial and personal circumstances.
