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Home loan arrears: all change

Since 6 April the Department of Social Security has stopped the practice of paying arrears on mortgage payments direct to the mortgage lender on behalf of borrowers who are getting Income Support for Mortgage Interest (Ismi).

It is estimated that there are 138,000 families who have been getting payments for arrears deducted from their income support payments and paid direct to their lenders in addition to Ismi payments. Under the new rules, the amount, which could be up to pounds 2.40 a week for each of up to three mortgages or other loans, will now be paid to the claimant.

But the Council of Mortgage Lenders says the arrears deductions have played a useful role in containing arrears in recent years, and the deductions became even more important after October 1995, since when borrowers with new mortgages have had to wait nine months before they are entitled to Ismi.

The CML now believes many borrowers in arrears are in no position, financially or temperamentally, to make the payments of arrears from their own resources. It fears that the money will not be paid, the arrears will mount up and lenders will be more likely to seek possession orders.

There were only 8,350 cases of homelessness caused by mortgage arrears last year, 8 per cent of all the specific causes for repossession proceedings and only half the 1991 total of 16,630 cases. In the fourth quarter of last year only 1,780 repossessions were blamed on mortgage arrears. The CML fears that total could start to rise again under the new DSS rules.