Government to help struggling mortgage holders

12 May 2008 / by Rebecca Sargent
The Government has announced plans to inject £10million into the provision of debt help and advice in attempts to stem repossession figures, up 17 per cent last quarter compared with a year ago.

The figures were revealed last week by the Ministry of Justice and have provoked speculation as the UK faces a credit crisis and possible recession. The last time repossession figures rose was during the recession of the 1990s, causing people to assume we are heading for recession now.

Consequently, the Government has been forced to act fast, hence its announcement of a £10million package designed to support home owners who are struggling to keep up with their mortgage repayments.

Chancellor of the Exchequer, Alistair Darling, said: "It is clear from speaking to consumer groups and the mortgage industry that borrowers may be concerned about the impact of the current market conditions on their mortgages.

"That is why it is vital that the Government, working with the industry, offers as much support as possible both directly to those people and to the consumer advice groups who can help them in their day-to-day lives." He added.

The cash will be focused on improving advice and representation for those facing difficulties as a result of the current economic climate. In particular it will expand access to free legal representation in court and strengthen advice services.

In addition to the £10million, the Government revealed it will plow an extra £9million into face-to-face debt advice provided by third sector partners, including the Citizens Advice Bureau (CAB).

Commenting on the rise in repossessions, head of consumer policy at the CAB, Sue Edwards, said: "We have seen a sharp rise in the number of people coming to us with mortgage arrears, and evidence that in too many cases lenders are using court action as a first rather than last resort."

Calling for lenders to be more sympathetic, she continued: "We want to see all lenders doing everything in their power to avoid things getting to this stage. This means treating borrowers in arrears fairly and sympathetically, and being willing to negotiate with borrowers in trouble.

"Our evidence shows that all too often this isn't happening, which is why we need a 'pre-action protocol' – measures to ensure only those cases where no agreement is possible end up in court." She concluded.

The Government's action is intended to assist support networks such as the CAB and avoid a reoccurrence of the 1990s when repossessions reached an all time high.

Commenting on the importance of advice and support, Michael Coogan, director general of the Council of Mortgage Lenders, said: "No-one wants to see repossessions rise. But risk is a part of life, and for some households circumstances change and they cannot get back on their feet. However, most people who suffer payment difficulties can get out of trouble by taking good advice, prioritising their debts, and communicating with their lender early."

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