by Mark Johnston
A fall in the number of mortgages in arrears and the fairly stable picture on repossessions are largely due to the beneficial effects of low interest rates. However effective arrears management and good communication between lenders, borrowers and debt counselling organisations has also played a large part.
One of the significant reasons that people fall behind with their mortgage payments is that they sometimes prioritise other debt payments above their mortgage. For example they forgo the mortgage to pay a credit card but this could end up with repossession which would not happen the other way round.
Using a debt management company can help home owners maintain priority payments like their mortgage, while enabling them to get other unsecured debt repayments under control.
Those having financial problems should also speak to their lender as they will do their utmost to help borrowers keep their homes. Repossessions are always a last resort, as typically they lose money on properties.
The Council Mortgage Lenders (CML) said that there was a slight fall in the number of people falling behind with mortgage payments and approximately 27,500 properties were repossessed in 2011, 4% fewer than in 2010.
Despite the squeeze on household finances, record low interest rates have meant that the mortgage bill for many families has been relatively low.
But experts have warned that falling incomes, rising living costs and the ever increasing rise in unemployment could potentially push up the number of people facing mortgage arrears in 2012.
The Council Mortgage Lenders (CML) has forecast that repossessions will go up from 37,000 to 45,000. Although this higher level of repossession would still be lower than in 2009.
James Fella, personal debt expert at beatmydebt.com said “even though interest rates are predicted to remain low, many families are facing reduced income due to employment.
Although home owners could now see repossessions soar as an obscure EU directive is being pushed through the European parliament.
This directive would mean that British lenders will be forced to start repossession proceedings when borrowers fall behind on their payments after three months. Home owners currently have to be six months behind before repossession.
Banks will also be given less time to restructure payments to help home owners avoid defaulting.
The directive would almost definitely ‘pull the rug’ from under thousands of Britons who are currently struggling to keep up with payments. While it would be disastrous for borrowers who plunged into default as a result, it will also pile extra pressure and cost onto lenders.
Micheal Atkinson, director of mortgage brokers Summit Capital mortgages, suggest that “were this EU directive to become law, the amount of slack that UK lenders can give struggling borrowers would be halved”.
The directive is being brought in to make banks safer and reduce the risk of another financial crisis.
The EU also want to bring in this directive so that mortgage laws are identical across the continent and therefore it will be easier for home owners to compare deals
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