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Lenders blast repossession rate

Dan Johnson

UK mortgage lenders have been blasted for taking a tough stance with consumers over home repossessions.

New figures out from the Council of Mortgage Lenders have shown a 41 percent jump in the number of repossessions by its members, a sure sign that borrowers are suffering from the tough line taken by mortgage companies when their repayments fall into arrears.

Repossessions climbed to their highest level in 10 years in the first half of 2008, with 18,900 homes being taken back from borrowers, up from 13,400 in the second half of 2007.

Critics have claimed that this is not fair to consumers, who have found themselves unable to remortgage to achieve better repayment rates, a strategy that would previously have been open to them.

Ed Stansfield, an economist with Capital Economics confirmed that lenders are giving less leeway to borrowers that fall into arrears: “Lenders are quicker to take action against defaulting borrowers, particularly those with poor credit histories. With this sector now representing a more significant part of the market than they have done in the past, repossession rates are rising more sharply than the number of households falling into arrears.”

Lesley Titcomb, a director at the FSA, added: “More people are struggling to meet their mortgage payments and it is vital that firms treat them fairly. Repossession has to be the last resort.”

Commenting on the current situation, CML director general Michael Coogan observed: "The number of people facing difficulty needs to be kept in perspective. The good news is that most people are coping well and continuing to pay their mortgages in full, despite the higher costs of food and fuel and the higher mortgage rates now prevailing in the market for those coming off cheaper original deals.

"But it is inevitable that more borrowers' coping strategies will come under pressure in current conditions than in the unusually benign years of the last decade. That's why lenders, government and the advice sector are working closely together to minimise the impact on borrowers.

"We will continue to work on behalf of the whole industry with the FSA and others to ensure fair practices are maintained. And we continue to press the government to play its part in creating an effective safety net for vulnerable borrowers facing a short term loss of income through better state support.

"No-one wants to see a household lose their home, and repossession typically leads to a loss for the lender as well. The focus of lenders' arrears management policies today is on seeking realistic alternatives that balance the interests of customer and lender. Anyone who thinks they may be heading towards financial problems should contact their lender to discuss their options - the earlier the better."