Blot on the record haunts borrowers: Andrew Bibby finds societies get tough with home-buyers who have a history of mortgage arrears

A RECORD of mortgage arrears can haunt even those borrowers who successfully pull themselves out of the mire and manage to pay off all the money they owe.

Building societies are now much more cautious about making loans to home-buyers with a history of arrears. 'An awful lot of people are going to go along to their building society to be told, 'Yes, we know you got over your problems, but because you were in arrears a year ago we are not going to lend to you again,' ' says Ian McKenna of Blyth McKenna, the mortgage broker.

Lenders are naturally wary after a year in which their bad debts rose steeply. However, Mr McKenna argues that building societies may also be constrained in their lending strategies by capital adequacy requirements laid down by their regulatory authority, the Building Societies Commission.

The rules are complex and mean that societies are able to make the same amount of capital go further if they lend to borrowers who have no previous arrears problems. For new advances, a debt problem is defined as more than three months' arrears at any point during the past three years.

When approving new mortgage loans, societies must check whether this level of arrears has been exceeded, in order to record the appropriate level of capital backing required.

The Nationwide building society says it uses this threshold when assessing mortgage applications. 'If the arrears were more than this, we'd have to look much more closely,' said a spokeswoman for the society.

In general, however, the societies maintain their lending policies are not directly affected by the Commission's capital adequacy regulation. 'This is merely something we have to comply with. It would not affect our decision as to whether we would lend to a borrower who had previous arrears,' Frank Bartlett, head of lending at the Woolwich, said. He added that his society tried to be sympathetic to applications from existing Woolwich borrowers.

Phil Jenks, controller of mortgage lending at the Halifax, concurs. 'The fact of previous arrears is not in itself an obstacle. We would want to go back over their track record. It would be very hard not to help if a borrower had a clear round for 10 years and then hit a problem with, for example, redundancy,' he said. Mr Jenks too asserted that the society's existing customers could expect a more understanding response.

Nevertheless, it is far more difficult to secure a mortgage loan than it was in the rubber-stamping mid-Eighties.

Centralised lenders may be prepared to consider lending to borrowers who have maintained a good payments record for the past year but have been turned down by building societies because of problems in the more distant past.

But the message for anyone who has developed arrears in the past and is now looking for a mortgage is to stick with the present lender. For those who are having difficulties at present, the path may prove smoother in the future if arrears are kept on the right side of the three-month threshold.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links