Half a million face mortgage arrears

Banks urged to show more patience towards struggling homeowners
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The Independent Online

Bank and building society executives should be forced to report monthly on how they treat homeowners who fall behind on mortgages, a campaigner urged yesterday.

The call came amid predictions that repossessions next year will rise to the record levels of the early 1990s.

Mick McAteer, director of the Financial Inclusion Centre, said ratcheting up pressure on the banks – whose "reckless lending" had caused the current financial woes – would prevent even more people losing their home as job losses mounted.

He demanded that lenders be forced to report to the Chancellor monthly after the Council of Mortgage Lenders (CML) forecast that 500,000 homeowners would fall behind on their mortgage repayments by more than three months in 2009, more than double the 210,000 expected this year. The lenders' representative forecast repossessions would reach 75,000 – up 67 per cent on this year and the highest since the previous record was set in 1991, following the 1980s housing crash, when there were 75,500.

Both predictions were made despite the Bank of England base rate falling to 2 per cent, promises from mortgage lenders to delay court proceedings for repossessions and the Government's scheme to aid borrowers.

Announcing its 2009 forecasts, the Council of Mortgage Lenders, was unequivocally gloomy forecasting a fall in overall lending next year. It said: "However hard the government and the lending industry work towards improving conditions, 2009 is going to be a very tough year in the UK mortgage market.

The CML estimated that "a significant number" of repossessions would be cases where the property had been abandoned or there had been fraud, while a "sizeable share" would be wealthier buy-to-let borrowers.

However, it added: "Even though lenders will seek to minimise repossessions in 2009, the worsening economic backdrop does point towards an inevitable increase in the number of cases where a sustainable alternative solution cannot be found. "

A surge in unemployment – rising at its fastest level in decades with 75,700 more claiming Jobseekers Allowance last month – will force many homeowners to renege on mortgage payments.

Many borrowers also have other extensive credit card debt and loans accrued during the years of economic growth before the credit crunch bit.

Mr McAteer said: "The latest estimates from the CML are alarming and confirm our worst fears. Unless the Government and FSA force lenders to treat borrowers fairly, repossessions will rise to levels not seen since the early 1990s. "Lenders should be required to report on a monthly basis how many borrowers they have in arrears, how many they are repossessing, and justify their behaviour."

He added that the CML estimates did not include repossessions by sub-prime lenders who were not CML members and were not subject to the same constraints.

Adam Sampson, chief executive of housing charity Shelter, also called on banks, building societies and ministers to act more decisively to allow people to keep their homes.

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