Turning the tide?
Ar y dudalen hon
Evidence from the free advice sector on mortgage and secured loan possession actions in England in July 2009
Summary
The financial crisis and recession have fuelled a rising tide of mortgage arrears and repossessions. Government, lenders and regulators have taken welcome action to protect people from losing their homes unnecessarily.
Our advisers see evidence of these initiatives working in many cases, but also some gaps. We asked those giving last minute advice to people at court on the day of their repossession hearings about the details of 452 cases they had seen in county courts in England in July 2009.
Job loss and other loss of income were the most common reasons given for mortgage arrears.
Overall, 77 per cent of clients advised avoided immediate loss of their home. But their circumstances suggest up to half could find it difficult to sustain repayments set by the court unless their incomes recover quickly.
In a third of recorded cases, advisers considered the lender had not complied with the mortgage pre-action protocol, which requires them to take court action as a last resort after offering borrowers other options for dealing with their arrears. Although judges did ask questions about this, they only applied sanctions for non-compliance in six cases.
Sub-prime lenders who specialise in lending to higher risk borrowers were taking court action earlier than high street lenders. A few sub-prime lenders in particular had significantly more court cases than their share of the mortgage market would suggest.
Low income households were the most likely to lose their homes.
There appeared to be some under-claiming of support for mortgage interest (SMI), and many borrowers were paying higher monthly interest rates than would be covered by SMI payments.
This report suggests the tide of mortgage repossessions has not yet turned. It calls for further action by lenders, regulators and Government to strengthen help to protect people from avoidable homelessness.