Mortgage arrears cases rise by 20%

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The Independent Online
THE NUMBER of homeowners being taken to court by lenders because they have fallen into arrears with their mortgages has risen by 20 per cent in the last quarter.

But despite the current economic uncertainty, the Council of Mortgage Lenders said this did not necessarily mean a recession was around the corner.

The figures, issued by the Lord Chancellor's Department, show the number of applications made by lenders to take homeowners to court. Some of the applications will not result in a court hearing as lenders will pay their debts once proceedings reach this stage.

Chris Sonne, of the Halifax, the largest residential mortgage lender in the UK, said the number of Halifax homeowners in arrears had fallen by 14 per cent. "Our figures show that more people are coming out of negative equity and house prices are starting to rise again.

"But if people do fall behind with their payments, for whatever reason, we try to avoid court action if possible. Our policy is to try and come to an arrangement with the owner rather than go through the courts, but some lenders are more likely to start court proceedings."

A spokeswoman for the Council of Mortgage Lenders said there was unlikely to be one clear reason for the rise in court applications, but added that lenders were not resorting to court actions any more than in previous years.

"There have been some significant rises in interest rates over the last year, which may have resulted in more people falling behind with mortgage payments," she said.

"It may also be that lenders are taking people who won''t pay their mortgage to court to try and force them into coming to some sort of arrangement rather than an increase in the number of people who can't pay.

"Once the people who won't pay have been taken to court they will often come to an arrangement with the judge about repayments. This means that although there appears to be an increase in court cases there is not necessarily an increase in repossessions."

She added that some lenders were reporting a backlog of arrears cases which could be pushing up the figures. Although the number of court actions had risen significantly over the last quarter, the number of orders made to repossess homes has fallen by 5 per cent.