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Published on:June 4, 2014Author:The Debt Advisor

The Financial Ombudsman Service has urged home owners who get into difficulties with mortgage repayments to seek help as soon as possible.

A record breaking 25,000 people contacted the Ombudsman last year with questions or concerns about home finance problems.

In 40% of the cases the Ombudsman received, homeowners were struggling to make their monthly payments. A third of people who got in contact were already in arrears.

The Ombudsman said that an increasing number of people concerned with losing their homes were in debt denial and risked leaving it too late to seek help.

A third of all complaints were upheld by the Ombudsman, but on many occasions it said the customer was seeking an unrealistic solution such as payments and interest being suspended indefinitely or debt being written off.

The Ombudsman has called on mortgage lenders to ‘get creative’ in helping their customers instead of taking a ‘black and white’ approach.

Difficulties with mortgage repayments were half of all calls The Ombudsman received from people with severe financial difficulty.

The Financial Ombudsman says that is has begun working with creditors to make sure they help and work with their customers if they run into difficulty.

These figures from The Ombudsman add to the concerns that the UK is facing another housing bubble at a time when many homeowners are already overstretching their finances.

Beverley Budsworth, MD of The Debt Advisor said: “We have seen a number of examples where lenders have refused to consider any reduction of mortgage payments despite the fact that this has left clients with no disposable income to meet their IVA payments.

“These cases have generally involved requests to the hardship teams not to convert interest only mortgages to capital repayment. One particular lender’s response on one case was “Mr and Mrs P can afford to make repayments on their mortgage at this level and they are not essentially concerned with how their unsecured debt is repaid.”

“In another case involving the same lender, a couple found that the repayments on their £640,000 mortgage increased from £2,500 to £4,000 per month. Having no choice but to hand back the keys, the property is now on the market at around £175,000 less than the market value. The lender looks to sustain losses of more than £140,000.”

This is happening despite the Government and Regulators pushing lenders to offer help to struggling homeowners. They state that this help might include payment holidays, temporary reductions in monthly repayments, temporarily switching borrowers to interest-only mortgages or extending mortgage terms to increase families’ chances of remaining in their homes. Paul Smee of the CML has been quoted as stating that resorting to repossession is the lender’s last resort.

This really does not augur well for when interest rates do rise. We could be looking at substantial increases above the 2014 forecast number of repossessions of 37,000.  Action is needed by regulators and trade bodies representing Insolvency Practitioners to ensure these cases are treated fairly by the hardship teams.

The Debt Advisor can advise on all kinds of debt solutions such as Protocol Compliant Debt Management Plans (P-DMP), Individual Voluntary Arrangements (IVA) and Bankruptcy.

We are regulated by both DEMSA and DRF and we adhere to their codes and standards. The Debt Advisor LTD is also authorised and regulated by the Financial Conduct Authority.

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