"This will have significant implications for the mortgage market which remains underprepared for this shift."
In its quarterly bulletin, the AMI said arrears would begin to rise due to changing employment dynamics, an ageing society increasingly reliant on work and debt and a steadily rising Bank Rate.
The AMI noted that the incidence of arrears on short-term finance loans funded by peer-to-peer and other bridging lenders has already risen and the number of borrowers falling behind on loan repayments, albeit in unregulated markets, is steadily climbing.
The Association added: "Anecdotal evidence indicates that short-term lenders are beefing up collections departments in anticipation of further arrears; it may be that the longer term regulated market should consider its own readiness for rising arrears, particularly as the short-term sector usually leads the residential market where arrears and possessions are concerned."
The bulletin also said that lending practices in the mortgage market "have some way to go" to provide sufficient flexibility for an increasingly part-time or self-employed workforce.
It explained: "Longer working lives also reflect not only medical advancement and longer life expectancy, but also potentially a growing reliance on debt further into later life. Again, this will have significant implications for the mortgage market which remains underprepared for this shift."
Due to this, the AMI said the need for remortgage advice is "becoming increasingly pertinent" which it believes is "ironic given the recent publication of the FCA’s Mortgages Market Study and its proposal for advice to be scaled back and execution-only to be allowed to replace it".
The AMI said it "strongly opposes" the FCA's proposals and warned the regulator not to "rush to change policy that will result in thousands of mortgage borrowers receiving a poorer outcome than they should and would under existing regulation".
