Mortgage default levels falling

Over the past few years problems with finances, higher mortgage rates, and the global financial crisis has plunged many people into severe financial difficulties, and as a result of this many homeowners have been unable to keep on top of their mortgage repayments.

The high level of mortgage defaults over recent years has resulted in many people having their homes repossessed, which naturally caused a great deal of concern amongst consumers and officials. The recession also took its toll on the ability of homeowners to make repayments on their mortgages, with many people losing their jobs as a result of the recession.

However, with the recession now over and the financial markets easing up the level of mortgage repayment defaults has been falling recently. The Bank of England has issued figures showing the fall in the level of mortgage repayment defaults in the UK, which will come as good news for banks and industry groups.

The fall in mortgage defaults has been occurring for a while now, and industry experts have said that in the latter part of 2010 it will remain largely flat. Some have even predicted that in the short to medium term mortgage repayment defaults could actually start to increase again as a result in an economic slowdown caused by changes made in the recent emergency budget by the new Chancellor of the Exchequer, George Osborne.

Further job losses are also expected to occur as a result of the budget changes, and this could affect the ability of more people to make their mortgage repayments. Officials advise those that feel that they are in danger of falling behind with mortgage repayment to contact their lender or a debt advice group as early as possible so that the problem can be sorted out before banks have to resort to repossession action.

Tags: mortgage rates, default, mortgage, crisis, homeowners

Risk of default increased by lack of checks

According to a recent report released by the UK’s financial regulatory body the risk of homeowners defaulting on their mortgage repayments has been increased as a result of various lenders allowing them to borrow money to purchase a home without carrying out adequate checks into their income.

The Financial Services Authority claims that some lenders have been allowing consumers to borrow money to buy property but have failed to determine whether they can actually afford the repayments based on their income.

With a series of five interest rate rises already having taken place in the past year, along with the threat of further rises, many homeowners with variable rate mortgages are struggling to keep up with repayments, even though they may have been able to comfortably afford the repayments when they took out the loan. However, for those that were struggling initially, as a result of being able to borrow more money than they could actually afford, the interest rate rises could tip them over the edge.

The FSA has been investigating the sub-prime market, where brokers and lenders seem to be unable to show whether the borrower can actually afford to make repayments on the amount that they borrow. According to reports around one third of brokers have been unable to confirm whether a borrower could actually afford the mortgage, and over half of them allowed borrowers to self certify their income.

One MP stated: “Talking about a few rogue brokers is just skimming the surface of the problem. While rogue brokers are a problem, the more pressing issue is high street lenders aggressively trying to build market share. Lending income multiples for mortgages are now at an all-time high and, with interest rates set to rise further, the outlook for many homeowners looks grim.

Tom Smith
13th September 2007

Tags: default, Mortgages, brokers, homeowners, payments, lenders, home

Credit card balance transfer fees rise

The cost of transferring balances across credit cards has been steadily rising in the past year, research from MoneyExpert.com has found.

Since being forced by the Office of Fair Trading to cut their charges, credit card providers have raised transfer fees from on average half a per cent to 2.67 per cent.

This tactic has been seen by some as a strategy to earn back some of the money the credit card providers lost when they were forced to cut their charges.

Sean Gardner, chief executive of MoneyExpert.com, said: “What goes down must go up seems to be the experience in the credit card industry.

“Card firms have lost out since they were forced to cut so-called default charges so now customers are losing out as balance transfer fees increase.”

However, though balance transfers are increasing, consumers should still be on the look out for better rates and be willing to switch, Mr Gardner said.

Meanwhile, the overall amount of personal debt in the UK now exceeds one trillion pounds, according to the debt organisation Credit Action.

Tags: year, credit, action, past year, chief executive