ROOF Blog

Nearly half of people having difficulties paying their mortgage do not seek advice, often because they feel their problems are not serious enough or they do not know where to go for help. Of those who sought advice, two-thirds went to their mortgage lender, while one in four got help from Citizens Advice. The Financial Services consumer panel which produced the figures and which advises the Financial Services Authority said there was an ‘urgent need’ for more investment in information and advice, so consumers understand that debt advice agencies must not be ‘seen as a last resort’.

Which? magazine has called for the Financial Services Authority to ‘name and shame’ lenders charging customers with exorbitant mortgage arrears charges. Which? wants the list submitted to judges hearing repossession cases and the culprits fined, with the revenue going to help borrowers access independent debt advice, and it has submitted a Freedom of Information request asking for the names of the lenders. It also wants lenders to provide an itemised breakdown of additional costs, the suspension of arrears charges where consumers have made agreements to pay off the debt, and a review of charges by the FSA.

The number of tenants struggling to pay their rent is rising, according to the Association of Residential Lettings Agents (ARLA). Around 65 per cent of agents have seen an increase in renters falling behind on their rent during the past six months, while 93 per cent said they had seen a rise in the number of tenants haggling with landlords about the level of rent. ARLA said the increases were not just about tenants experiencing financial problems, but were also likely to be due to people cashing in on falling rents.

The Association of Residential Lettings Agents (ARLA) has also questioned the new repossession proposals for rented property. It has called for the government to be clearer about its intentions to implement the schemes into law ‘at the next opportunity’ saying the timeline is far too vague. It also says that seeking to notify tenants seven weeks before repossession hearings could encourage tenants to break their contracts and seek new landlords too early.

John Healey has announced plans to set up a new central team to fast track urgent home repossession cases from next month. He defended the government’s effort to help struggling homeowners saying it has put into place help ‘at every step of the way’ and to ensure that lenders can only repossess homes as a last resort. More than a thousand households a month were being helped under the mortgage rescue scheme, the minister said.

However, consumer groups and charities including Shelter have been speaking before a Treasury select committee looking at how mortgage lenders handle repossession cases. They have called the government schemes ineffective and accused the Financial Services Authority of being too slow in penalising lenders who are guilty of bad practice, and of failing to name and shame culprits. They said that lenders were also failing to disclose enough information on how they manage arrears cases. Kay Boycott, a Shelter spokesperson said that as many as 120,000 people could lose their homes by 2011 in a ‘second wave’ of repossessions.

Shelter has warned the government and mortgage lenders to start preparing for a second wave of arrears and repossessions that will hit the UK in the next two years. It says hundreds of thousands of homeowners face being repossessed or falling into arrears as the effects of rising unemployment, higher interest rates and mortgage support schemes ending start to take effect. Shelter has seen a 250 per cent increase in the number of calls to the helpline regarding mortgage arrears in the past year.

Meanwhile, debt charities have attacked high street banks for repossessing homes to recover credit card debts of just several thousand pounds. Citizens Advice has warned borrowers struggling to repay credit cards or personal loans they are at risk of losing their homes because lenders are increasing securing debts against a borrower’s property. Citizens Advice said that creditors are using the courts to ‘intimidate’ vulnerable debtors into paying unaffordable amounts. It points to research showing that since 2000 there has been a 722 per cent increase in the number of charging order applications.

State-owned lender Bradford & Bingley has confirmed that one in 20 of its mortgages are in default, and the rate is set to go higher. Chairman Richard Pym said the proportion of borrowers more than three months behind on their repayments had worsened since March, from a rate of 4.6 per cent to more than 5 per cent now, and estimated that loan losses this year would be between £600 million and £700 million, up from £500 million last year.

Margaret Beckett has announced a proposed amendment to the law that would give tenants whose landlords are facing repossession more time to find somewhere else to live. Under the new proposals tenants will be given two months’ notice by mortgage lenders who have taken possession of the landlord’s home. The Council of Mortgage Lenders has warned that a number of tenants will slip through the cracks, especially those renting a property unofficially.