The number of people who complain about their mortgage is soaring to record levels, but many are leaving it until they get into financial trouble before raising the alarm.
Problems are becoming so bad that lenders have been told today to “get creative” and do more to help struggling borrowers.
The Financial Ombudsman Service’s latest complaints data published today reveals that last year 13,659 people – the highest number recorded – contacted the ombudsman for help with a mortgage or secured loan problem.
Worryingly, a third of these had slipped into arrears before they sought help. And, of the remaining cases, a large number struggling to make ends meet felt unable to say that they were facing significant financial problems.
The chief ombudsman, Tony Boorman, said: “Mortgages are the most significant purchase most of us will make in our lives, so we understand why people might be reluctant to say that they’re struggling to pay for their home.
“Many of the cases where people face losing their home have been heartbreaking to deal with – but could potentially have been avoided. So if money is tight, you should never be afraid to ask for help or guidance. Speak up sooner rather than later; there’s a lot that can be done to help before things get out of hand.”
The ombudsman has been alerting lenders that they’re expected to get creative when helping people get back on track – especially before payments get missed. And though early signs suggest that this is having an impact, there’s still more that they should do to help, Mr Boorman said.
Typical areas of complaint taken to the ombudsman relating to financial difficulties include arrears handling, charges, repossession, post-repossession problems and recovery of shortfalls.
Other problems brought by people in arrears included sales and advice, mortgage administration, upfront fees charged where no mortgage is offered and declined offers.
There have also been disputes over valuations and allegations of misrepresentation, suitability or misleading literature.
“Consumers and lenders all have a responsibility to work together when problems arise,” Mr Boorman said.
There was positive news from the Council of Mortgage Lenders last week, which reported that both the number and the proportion of mortgages in arrears fell during the first quarter of 2014.
CML’s director general, Paul Smee, said: “The downward trend in the number of mortgages in arrears or ending in repossession is welcome. Repossession is absolutely the last resort – the aim is to keep people in their home and get their finances back on track whenever possible.
“Lenders recognise that, behind the numbers, these are real households, with differing circumstances. Lenders try to ensure that all borrowers are treated fairly and sensitively. They continue to improve their practices to try to achieve the best outcomes when payment problems do occur.”
But The Money Charity revealed last week that the average household debt including mortgage was £54,546 in March, up from £54,434 the previous month.
Alarmingly, it also reported that the UK is currently seeing the biggest increase in loans and overdrafts for individuals since February 2008, suggesting that people may be, once again, taking on too much debt.
Michelle Highman, chief executive of The Money Charity, said: “Borrowing money when it’s done in a carefully thought-out, affordable way, can make things happen that would otherwise seem impossible. However, if you don’t have a plan to pay the money back, things can quickly spiral into more difficult, unmanageable debt.”