The Impact of Increased Arrears on UK Mortgage Providers

Table of Contents

DATAMONITOR VIEW

• CATALYST
• SUMMARY

ANALYSIS

• As the level of arrears increases, lenders need to find ways to help consumers
  • Around 1.88% of mortgages were in arrears at the end of 2008
  • The loss of one' s job or the failure of one' s business are the main drivers of arrears
  • Datamonitor' s Megatrends framework can provide more insight into why consumers fall into arrears
  • Communication with borrowers is seen as a vital tool against increased arrears
  • Special servicers help lenders to manage arrears more efficiently
  • Lenders have a variety of measures in place to help borrowers who are in arrears

• Repossession is seen as a last resort as it can be costly for both parties
  • Repossession levels were lower than anticipated in 2008
  • A few lenders have introduced a controversial six-month delay on repossession orders
  • Most lenders follow a standard process when taking possession of a property
  • Some providers have noticed an increase in voluntary abandonment cases

• Various regulatory measures are being introduced to reduce arrears and repossessions
  • The Homeowner Mortgage Support Scheme has been set up to help defer repayments
  • The Income Support for Mortgage Interest scheme has had an overhaul to make it more effective
  • The mortgage rescue scheme allows housing associations to rent property back
  • The Pre-action Protocol is a government initiative to further postpone repossessions
  • There has been a call for laws to be relaxed that allow those in arrears more time to pay off the loan
  • The cut in stamp duty may have caused more problems than it has solved

APPENDIX

• Supplementary data
• Definitions
  • Voluntary abandonment

• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: % of all mortgages at least three months in arrears
• Table: % of all mortgages taken into possession during each half yearly period

FIGURES

• Figure: The percentage of mortgages in arrears grew significantly in Q4 2008
• Figure: The FSA' s Money made clear guides offer clear advice on all mortgage-related issues
• Figure: Nationwide' s website provides a convenient source of information on useful debt advice bodies
• Figure: Lloyds TSB stresses the importance of action on the part of those facing financial difficulty
• Figure: The percentage of properties taken into possession in H1 2008 was 0.16%