Lloyds Banking, Natwest and other UK lending mortgage lenders face being mandated to help mortgage lenders in difficulty with payments under proposals put forward by the Labour Party.
Shadow chancellor Rachel Reeves suggested the move in an interview with the BBC today, with Labour to get UK finance regulator the FCA to intervene if elected.
Gary Greenwood, an analyst at Shore Capital, said most banks already offer some form of forbearance to customers who are struggling with their mortgage payments before going down this route.
“Furthermore, under the new Consumer Duty rules, which are due to come into force at the end of July 2023, banks have to act to deliver good outcomes for retail customers.
“This will include forbearance where it is a better outcome than repossession, in our view.
“Finally, if any mandate was to go above and beyond what was reasonable for a bank to do it could, in our view, backfire by reducing the supply of mortgages in the first place as banks will likely become even more cautious in their lending criteria.”
Greenwood concludes Labour is in effect asking the FCA to do what they do already, hence he believes the investment case for the banks is little changed.
“This remains positive in our view given strong balance sheets, the tailwind to income from rising interest rates and depressed valuations.”
Shares in Lloyds fell 1.4% to 43.1p and Natwest by 1.2% to 232.8p.