Mortgage arrears hit a record high

Article source:

Mortgage arrears hit a record high

It is all clear now that the most hit sector by the financial crisis is the mortgage sector with mortgage lenders taking full control of the market leaving their customers in dire need for advice on how they can get out of debt in the midst of the crisis. It is therefore no wonder that EuroDebt, a leading debt management provider, has recorded a huge rise in the number of mortgage customers seeking to join its Debt Management Plans (DMP). Since September 2007 the company reports a 109% increase every month in the number of consumers signing up for its plans. The report by EuroDebt that 21.1% of those joining the DMP programme are already behind with their mortgage repayments confirms a prediction by the Council of Mortgage Lenders (CML). CML predicts that by the end of this year there will be 45,000 homes repossessions and a further 170,000 households will over three months behind with their mortgage repayments.

As much as these numbers are shocking, the only way out now is to ensure that mortgage borrowers take the best advice they can get towards devising a way through which they can clear their mortgage debt. Debt management is the priority now for the mortgage borrowers to ensure that they get through the credit crunch and save their homes at the same time.

The number of homeowners seeking the debt management programme has doubled in the last one year according to Kevin Still, the Director at EuroDebt. In the same period, the average unsecured debt for all the homeowners in the DMP programme was at £31,685.64 soaring to 37,087.36 in the Christmas period. This is a clear indication of what amount of debt households are in, due to the ever increasing cost of living and unchanging incomes. Households are no longer in a position to make any significant savings as according to Equifax, a credit reference agency, the cost of living of about 78% of credit customers has increased by about £250 a month with only 30 percent of them being in a position to survive for two months incase they lost their jobs. Times are tough as the market situation now does not allow households to use one credit card to clear debt off another and re-mortgaging is not a viable option for many of them either.

Homeowners are now realising the importance of taking charge of their finances as early in their lives as possible because it is always so much easier to get into debt as opposed to getting out especially with the current financial crisis. Planning of ones monthly budget is the key when it comes to debt management. With the current situation however, homeowners are being urged to seek advice and take action immediately.

It is encouraging to see that some positive measures are being taken to help households, like the recent agreement by European Union leaders to release £12 billion towards helping small businesses as well as households. Another great gesture was the move by the Bank of England to reduce by half a percent its bank base rate to aid mortgage lenders and building societies get their customers through the crisis by reducing mortgage interest rates. At the same time, there hasn’t been any remarkable change for the mortgage customers, some of whom have seen their lenders increase tracker rates. It will be interesting to wait and see how many lender pass the rate reduction on to their mortgage customers.