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Banks told to help debt-ridden customers
Banks are being urged to step in and help customers with mounting debt and mortgage repayments problems amid predictions that housing repossessions in the UK will rise by 50 per cent over 2008. From March, UK banks will be expected to adhere to the updated Banking Code, which will recommend that lenders approach customers who facing financial difficulties as opposed to former guidance that stated it was up to the borrower to contact their banks in the event of loan or mortgage defaults. Previously, banks had been advised by the British Bankers Association to treat customers facing financial problems "sympathetically" under the Code, which is a non-statutory set of guidelines for UK lenders, but to wait for borrowers to approach them. However, in spite of being encouraged to taking a proactive approach to customers' difficulties, the Council of Mortgage Lenders (CML) expects the number of repossessions to rise from 30,000 in 2007 to 45,000 over this year. In 2005, repossessions totalled 15,100 and rose to 22,700 during the following year. The number of defaults is expected to rise as homeowners have struggled to cope with the effect of five increases in the UK interest rate since August 2006 as well as ballooning personal debt — in 2008, 120,000 individuals are expected to file for insolvency, more than the 110,000 people who went bust in 2007. It is hoped that the Bank of England will move to ease pressure on indebted individuals and homeowners on Thursday when it will announce whether it will cut borrowing costs for the second month in a row, after reducing the interest rate by a quarter point to 5.5 per cent in December. But the market is already closing to some borrowers. Last week, the Bank of England disclosed that, during the last three months of the year, it had become more difficult for potential borrowers to secure mortgages as banks tightened up their lending criteria in the face of the global economic slowdown and the sub-prime mortgage crisis, which has forced so far mainly US financial institutions to write-off billions of pounds worth of assets. No one has commented on this article. |
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