Simon Read: New code shows lenders how to be compassionate

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The Independent Online

Anyone who has ever been made redundant or been unable to work because of illness knows the sudden shock when the realisation strikes that they can no longer afford to pay their debts. But changes to the Lending Code announced this week means that financial misery needn't be added to the woes of being out of work.

Now companies which have signed up to the code – which includes all major lenders – have agreed to give debtors the opportunity to make token payments until their financial situations have recovered. On top of that, lenders say they will consider reducing or freezing interest and charges from struggling borrowers who experience an income shock.

Then from April, a new payment arrangement will be introduced through the Consumer Credit Counselling Service which will allow people with multiple debts to pay from as little as £1 a month to each debtor for up to six months as a token of their intention to repay the debts when they can afford to.

These changes could make all the difference to people struggling to get back on their feet. The CCCS claims that this is the first time anywhere in the world that people who can't pay have been offered a free repayment channel to reassure their lenders. If true, the Government should be applauded for leading the way in providing sensible solutions for hard-up families, rather than whipping them off to court and the poor house at the first sign that they may be struggling financially.

I've long advocated the freezing of interest and allowing families to make token payments while they're struggling through times of hardship, so this first step towards a more benign attitude to debt is welcome. I'll look forward to being able to write about the first people who, when faced with financial disaster, are met with understanding and compassion by their lenders. However, I suspect I'll be looking forward to that for a long time.

Northern gains

Smug Londoners thinking they are sitting on outlandish property price increases may have got a shock last week. A study by housing market analysts Academetrics revealed that, in fact, anyone who bought in the north of England 10 years ago would be sitting on a much greater gain than those in the nation's capital.

To pinpoint it, people sitting on the greatest increase in the value of their properties were those who bought in Yorkshire and Humberside in 1999. They would have seen a 147 per cent climb in the value of their homes by 2009. Over the same period, prices in Greater London rose by a comparatively paltry 115 per cent.

OK, that's just a random snapshot but it belies the belief that you have to buy in London to get the greatest gains on property. Over the period in question, every region did better than London, apart from the South-east which grew just 107 per cent.

It's true that over shorter, more recent periods, London properties have topped the tables. Home values in London climbed 27 per cent over the five years to December 2009 with the second best growth of 15 per cent posted by the North. Over one year, London climbed 7 per cent with the South-east second at 6 per cent.

But the figures suggest that London's recent recovery will soon slow and be overtaken by other regions. Potential homeowners could thus be better off heading north to look for the next property hotspot.

Julian Knight is away

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