- Language: English
- Published: September 2011
- Region: Global, Great Britain, United Kingdom
The Impact of Increased Arrears on UK Mortgage Providers
- Published: April 2009
- Region: United Kingdom, Great Britain
- 18 pages
As the economic situation deteriorates, more borrowers are falling into arrears on their mortgage repayments. This has led to an increase in repossessions although measures are being taken by lenders and the government to advise those in difficulty and actively help those most at risk. This brief looks at what is being done by all parties to reduce arrears and prevent repossessions.
- Analyzes increased arrears and repossessions in the UK mortgage market.
- Assesses the advice being offered by lenders to help those falling into arrears.
- Discusses the measures being taken by the government and any shortcomings there may be.
Highlights of this title
The percentage of mortgages three or more months in arrears grew from 1.10% in Q4 2007 to 1.88% in Q4 2008. The fourth quarter of 2008 saw 10,400 repossessions, a decline from the 11,100 seen in Q3 but greater than the 6,900 in Q4 2007.
Voluntary abandonment cases are on the increase. Mortgage providers such as Northern Rock have commented that they have been seeing an increase in cases since the summer of 2008, although the figure does not show up on official repossessions data because no court order has been issued during the process.
The Homeowner Mortgage Support Scheme does not go far enough. Credit Action has warned that the repayment holiday would only bring temporary relief as interest would continue to accumulate and be added to the overall loan. Meanwhile the Income Support for Mortgage Interest Scheme only aids those on long term benefits.
Key reasons to purchase this title
- See how arrears increased in 2008 and discover why consumers fall into arrears through The proprietary Megatrends framework.
- Gain an insight into the strategies being used by your peers to deal with consumers who have fallen into arrears.
- Understand what measures are being taken by the government to prevent borrowers having their homes repossessed.
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As the level of arrears increases, lenders need to find ways to help consumers
Around 1.88% of mortgages were in arrears at the end of 2008
The loss of ones job or the failure of ones business are the main drivers of arrears
Northern Rocks extravagant lending has led to arrears levels well above average
Datamonitors Megatrends framework can provide more insight into why consumers fall into arrears
A lack of Financial Intelligence can hinder a consumers ability to cope with financial uncertainty
Borrowers are looking for a degree of Comfort from their lender
The Wealth Complexity is another trend that can be used to explain how some consumers fall into arrears
Communication with borrowers is seen as a vital tool against increased arrears
Mortgage providers tend to supply advice leaflets with arrears statements
External debt counselors present a face-to-face option for banks
Some lenders direct borrowers towards Citizens Advice or the FSAs Money Made Clear online guides
Nationwides website has debt advice that is much easier to find than most of its peers
Lloyds TSB provides advice for those who are or anticipate falling into arrears on its website
Special servicers help lenders to manage arrears more efficiently
Lenders have a variety of measures in place to help borrowers who are in arrears
Repossession is seen as a last resort as it can be costly for both parties
Repossession levels were lower than anticipated in 2008
A few lenders have introduced a controversial six-month delay on repossession orders
A delay in repossessions may not be entirely beneficial for the economy
Most lenders follow a standard process when taking possession of a property
Lenders are often forced to take a big write down when selling repossessed property
Some providers have noticed an increase in voluntary abandonment cases
Various regulatory measures are being introduced to reduce arrears and repossessions
The Homeowner Mortgage Support Scheme has been set up to help defer repayments
The Homeowner Mortgage Support Scheme does not go far enough
The Income Support for Mortgage Interest scheme has had an overhaul to make it more effective
The mortgage rescue scheme allows housing associations to rent property back
The Pre-action Protocol is a government initiative to further postpone repossessions
Borrowers need to be made aware that they have certain legal rights
There has been a call for laws to be relaxed that allow those in arrears more time to pay off the loan
The cut in stamp duty may have caused more problems than it has solved
Ask the analyst
List of Tables
Table 1: % of all mortgages at least three months in arrears
Table 2: % of all mortgages taken into possession during each half yearly period
List of Figures
Figure 1: The percentage of mortgages in arrears grew significantly in Q4 2008
Figure 2: The FSAs Money made clear guides offer clear advice on all mortgage-related issues
Figure 3: Nationwides website provides a convenient source of information on useful debt advice bodies
Figure 4: Lloyds TSB stresses the importance of action on the part of those facing financial difficulty
Figure 5: The percentage of properties taken into possession in H1 2008 was 0.16%