David Prosser: Remortgage now to beat the bailiffs

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The Independent Online

New government figures showing a big increase in the number of households facing the loss of their homes should be a call to action, not a cause for panic. While the Government this week said that 26,000 people were threatened with repossession in the first three months of the year, predictions of housing-market doom are wide of the mark.

For one thing, these figures are for the number of repossession orders applied for by lenders, not actual repossessions. Some borrowers will settle their mortgage arrears once they are threatened with a county court judgment.

In any case, despite years of rocketing house prices, all the evidence is that the vast majority of borrowers are coping well with their mortgage repayments.

Last year, just 6,000 people lost their homes after failing to keep up with payments. That's 6,000 too many, but it's a tiny number when you consider that there were 75,000 repossessions-a-year in the first few years of the Nineties.

Higher mortgage costs are a worry. Many analysts are convinced that the Bank of England will raise interest rates at some stage during the next few months, which would raise the monthly bill of anyone with a variable-rate mortgage.

However, a rise in interest rates, by itself, is unlikely to tip many more people over the edge, particularly as it is likely to be small. In fact, debt advice charities say that it is a large increase in unemployment which would be most likely to cause a crisis. Fortunately, there is nothing to suggest that's what we are in for.

Still, this is no time to be complacent. If you're at all concerned about your ability to keep up with your mortgage repayments in the event of an interest-rate rise, now is the time to act. Fixed-rate mortgages remain very cheap - by switching, you get certainty about what your mortgage payments will be for the term of the fix, which makes planning ahead much easier.

Even if you don't move to a fix, think about remortgaging if you are currently paying your lender's standard variable rate. The battle for borrowers is cut-throat, which means that you may be able to save by changing lender, or even simply by threatening your existing mortgage provider with the prospect of a move to one of its rivals.

Prudential has clearly been taking lessons from the nation's politicians on spin-doctoring. The insurer this week said it would no longer make payments to firms that act on behalf of victims of endowment mortgage mis-selling. Instead, it will send compensation payments directly to policyholders.

Pru says it is making this move in the interests of consumers, because these claims-handling firms should not be charging people. Everyone can get free help when applying for compensation from the Financial Services Ombudsman, Pru points out.

I'm sure that's the reason the insurer is acting. It hasn't, for one moment, crossed my mind that Pru is fed up with having to deal with claims handlers, which have more resources than the ombudsman and are, therefore, able to press insurers for redress both more firmly and more speedily.

The truth is that claims handling firms are helping to clear a huge backlog of complaints about endowment mortgages. If people are prepared to pay for their help, that's their choice.

David Prosser was this week voted Personal Finance Journalist of the Year at the Headline Money Awards

d.prosser@independent.co.uk

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