As the cost of living rises and paying the bills becomes harder, a number of mortgage lenders have come under fire from the Financial Services Authority (FSA) for making life harder for UK homeowners.
Figures released yesterday from the FSA
showed that the number of UK homes that have been repossessed has seen a rise of more than 40 per cent in a year. The statistics show that in the first quarter of 2008 repossessions totalled 9,152, compared to 6,471 for the same period in 2007.
The difference indicates that the credit crisis, which began last August, is just beginning to hit UK homeowners where it hurts. It is evident that increasing numbers of Brits are beginning to struggle with their mortgage
repayments. However, the FSA is damning mortgage lenders
, particularly specialists, for acting too fast when it comes to repossessions, and failing to take individual circumstances into consideration.
Lesley Titcomb, director of the FSA, responsible for mortgage lending, said: "As our data shows in these current market conditions more people are struggling to meet their mortgage payments and it is vital that firms treat them fairly. This means paying attention to individual circumstances and not repossessing their homes when there may be an alternative solution.
"Repossession has to be a last resort," she warned. The sub-prime mortgage sector in the US is what caused the credit crisis to snowball in the UK. However, statistics from the FSA found that mortgage lenders are continuously failing to check borrowers credit histories, thus lending irresponsibly. In fact, this accounted for two per cent of new mortgage lending in the first quarter of 2008.
Welcoming the FSA's findings, head of consumer policy at Citizens Advice, Sue Edwards, said: "We welcome the findings of the FSA's research on lenders' mortgage arrears and lending practices, which mirror CAB clients' experience. Our 2007 evidence report showed that in some cases lenders have taken borrowers to court without exploring all other options available to address the arrears, resulting in excessive costs, stress and worry for borrowers.
"This could be avoided if lenders had acted in accordance with the FSA rules that govern arrears management practices," she added.
Commenting on the many potential alternatives to repossession, Legal and General's mortgage director, Ben Thompson, said: "There are many potential short-term solutions to plug the arrears gap that should be considered before going for a repossession, including the provision of special rates, switching to interest-only, payment holidays, or agreed payment plans. Each case must be dealt with individually and sensitively. Risk management is, of course, very important, but there is no need for knee-jerk reactions."
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