There was good news for consumers on Friday with the expected announcement on much-criticised sale and rent back schemes.
The Government announced plans to protect vulnerable consumers by regulating companies that buy people’s homes and then rent them back.
The Treasury said it would be introducing regulation in two stages to ensure consumers were protected as quickly as possible during the current market downturn.
The move follows a call from the Office of Fair Trading for the sector to be regulated urgently, after it found that sale and rent back firms were misleading customers about the value of their homes and their security as tenants.
Recession could drive market
Under sale and rent back schemes, companies buy the homes of people who face having them repossessed and then rent them back to them.
But the rapidly growing sector has come in for criticism, following claims that some companies pay less than 60% of the market value for properties, while others levy steep rent increases and some evict people after just 12 months.
There are fears that the recession could drive increasing numbers of people to enter into one of the schemes in a bid to avoid losing their homes.
Which? backs move
Following the announcement from the Financial Services Authority (FSA) to regulate the sale and rent system, Dominic Lindley, Personal Finance Campaigner, Which? said:
“In the current economic environment, consumers are at significant risk of not getting a fair price for their home and facing the risk of eviction in as little as six months. Prompt action is needed and the swift introduction of a regulatory regime for sale and rent back schemes by the FSA is a step in the right direction.
“Which? advises consumers to avoid these schemes until they are properly regulated. If you are having difficult meeting your mortgage payments, contact your lender and speak to an independent debt advice agency.”
Visit our advice guide on sale and rent back for more information.
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