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Some lenders still not doing enough to prevent repossession, despite improvements

15 May 2009

New research by leading advice agencies shows mainstream lenders’ practices have improved, whereas some lenders are still not fully using Government schemes to help struggling homeowners, in particular those in the sub-prime and second charge sector.

AdviceUK, Citizens Advice, the Money Advice Trust and Shelter have conducted a survey of their advice experts to see how Government mortgage repossession schemes are working on the ground.

The survey has found that while 51% of advisers surveyed reported an improvement in mainstream lenders practices since the Pre Action Protocol came into force, only 20% of advisers report that sub-prime and second charge lenders’ arrears collection practices have improved since the new guidance for judges was established.

National Debtline also conducted a survey of its clients, which reflects the experiences of advisers. 58% of callers in arrears with their first charge loan said the solution offered to them by their lender was affordable when told about repayment problems. This contrasts with only 39% of callers in arrears with their second charge loan who were offered an affordable solution.

AdviceUK, Citizens Advice, Money Advice Trust and Shelter are calling on all lenders to fully comply with the Pre Action Protocol and industry guidance to help prevent rising repossessions.

The surveys come ahead of new repossession and mortgage arrears figures due out today from the Council of Mortgage Lenders and the Ministry of Justice. Other findings from the adviser survey include:

Joanna Elson, chief executive of the Money Advice Trust said:

“Money Advice Trust applauds the improvements that many lenders have made in their practices. In the current climate, where 800 repossessions happen a week, it is vital that lenders adhere to the standards in the protocol. I welcome the fact that 51% of those surveyed found mainstream lenders’ practices have improved; clearly we need to ensure that this applies to all lenders.

“One of the findings was that a major obstacle to accessing the government mortgage to rent scheme was the bar on those with negative equity; and we therefore welcome the Government’s announcement in the Chancellor’s Budget that this scheme will now apply to those in negative equity.”

Citizens Advice Chief Executive David Harker said:

“The results of these two surveys show that currently, mainstream lenders are doing much more to help struggling homeowners than sub-prime and second-charge lenders. We want all lenders to be doing as much as possible to prevent people losing their homes. This means providing an understanding and constructive response and helping their customers come to a manageable solution.

Citizens Advice Bureaux in England and Wales saw a 49% increase in the number of new enquiries about mortgage and secured loan arrears last year. People who are struggling to pay their mortgage should speak to their lender straight away and seek advice.”

Steve Johnson, chief executive of AdviceUK said:

“The members of the AdviceUK network have reported a significant increase in the demand for debt advice over recent months, especially from homeowners who have either been made redundant or made to reduce their working hours.  

“The Government’s initiatives aimed at helping homeowners who are experiencing financial difficulties are therefore very welcome. It is clear from the research, however, that some lenders could do a lot more to help borrowers remain in their homes.

“Advisers are also struggling to cope with this increased demand for debt advice. I hope that the Government recognises that additional resources are needed across all parts of the free money advice sector to ensure that all clients receive the advice and support they need, not only in the current economic climate but in the long-term too.”

Sam Younger, chief executive of Shelter said:

“The research paints a mixed picture of how lenders are reacting to Government schemes to help homeowners. Unless all lenders urgently sign up to and consistently implement these or equivalent schemes and strictly adhere to the pre-action protocol many people will fall through the gaps and repossessions will continue to rise.

“The demand for advice services like ours has never been greater but we urgently need the Government to provide further resources for vital debt advice, so that everyone can get free advice when they need it. In the meantime we would urge people to contact their lender for advice.”

To view the full survey report contact Shelter’s press office.  

Additional notes to editors:

A sub-prime mortgage (non-status or impaired credit lending) – offered by lenders to borrowers who have variable or uncertain incomes (such as the self-employed and contract workers) or who have poor credit histories. This may include for example: county court judgements, previous or existing mortgage or loan arrears or defaults, rent arrears, bankruptcy or individual voluntary agreements (IVAs).

A second charge loan – Whereas a first charge loan is the mortgage used to buy your home, a second charge loan is a loan that can be taken out for any purpose but is secured against your home. This means that if you default on the payments you could be at risk of losing your home.

The Pre Action Protocol was introduced by Government in November 2008 and provided new guidance for judges to ensure that lenders take all reasonable steps to avoid repossession.

Over 500 of National Debtline’s callers with mortgage arrears were surveyed about how their lender(s) had responded to the situation. The data collected reflects the experience of NDL’s clients: some of whom had only first or only second mortgage arrears, whereas others were in difficultly with both first and second charges. National Debtline advisers collected the information throughout April 2009.

The Adviser survey was conducted online with 382 advisers from across England and Wales between 1 and 28 April 2009. Advisers working for AdviceUK, Citizens Advice, Money Advice Trust and Shelter (England) and Shelter Cymru were invited to participate in the survey. Screening questions were used to ensure that only advisers working in England and Wales and who had dealt with relevant cases participated.

AdviceUK is the largest network of independent advice organisations in the UK. It currently has over 830 members spread throughout the UK.

Shelter helps 170,000 people a year fight for their rights, get back on their feet, and find and keep a home. We also tackle the root causes of Britain's housing crisis by campaigning for new laws, policies and solutions. Further information at www.shelter.org.uk

Notes to editors

  1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see citizensadvice.org.uk
  2. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality. For online advice and information see adviceguide.org.uk
  3. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 7.1 million problems from April 2010 to March 2011. For full 2010/2011 service statistics see: citizensadvice.org.uk/press_statistics
  4. Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable. (nfpSynergy’s Brand Attributes survey, May 2010).
  5. Most Citizens Advice service staff are trained volunteers, working at around 3,300 service outlets across England and Wales.