Struggling homeowners need more Government help, while many providers still fail to pass on rate cuts

01 February 2008 / by Joy Tibbs

Housing charity Shelter is calling for an arrears ‘one stop shop’ to help people that are struggling with mortgage repayments.

It is urging the Government and mortgage lenders to collaborate in providing a free telephone and online service for those that could see their home repossessed as a result of falling behind with mortgage payments.

Chief executive, Adam Sampson, says: “Shelter has seen a massive increase in people coming to us with mortgage problems, and with repossessions set to rise throughout this year, we simply haven’t got the resources to help everyone.”

The charity has seen the number of people seeking its help for mortgage-related issues rise from 70,000 in 2006 to 80,000 in 2007. It is expecting this figure to increase further this year as more than a million households could face repossession.

“The Government, mortgage lenders and the Financial Services Authority (FSA) must take responsibility and start repairing the broken state safety net to ensure that if people face difficulty, there is protection in place and somewhere to turn for advice,” says Mr Sampson.

Shelter also suggests that the FSA takes a harder line with mortgage providers who sell customers products they cannot afford and are then quick to repossess property.

“Instead of helping struggling homeowners get back on their feet, the actions of some lenders, combined with a lack of Government support, simply exacerbates their problems and condemns them to the despair and misery of losing their home,” he says.

Meanwhile, mortgage specialist John Charcol has pointed out that providers are increasing margins on tracker mortgages by refusing to pass on interest cuts to consumers, despite chancellor, Alistair Darling’s attempts to encourage this.

“Lenders including Halifax, Bank of Scotland and Coventry have all increased their tracker rates this week, Royal Bank of Scotland by 0.25 per cent and Abbey by 0.35 per cent in some cases,” claims technical manager, Katie Tucker.

“Lenders are clearly still recouping their losses from the liquidity crisis, which does not bode well for borrowers on discounts or Standard Variable Rates. After the last cut, around a fifth of lenders did not pass the cuts on at all, and many others only passed on 0.1–0.2%.”

Ms Tucker says it is unlikely that mortgage companies will respond to further interest rate cuts, although many people believe cuts will bring some relief.

According to John Charcol, trackers with no Early Repayment Charges (ERCs) continue to be a viable option for homebuyers, while fixed rates are also improving.

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Written by Editorial Team