View more on these topics

Some salutary lessons for borrowers

After the heatwave, as I write this column the increasing amount of cloud outside reflects the gloom of the financial news.

Bad debt and repossessions dominate the headlines, trumped by the 0.25% rise in the base rate. Consumers should heed the warnings.

Five big banks reported their profit figures recently and while they look healthy, there is an ominous undercurrent. The five report bad debt write-offs of over 5.75bn during the past year.

While they were producing their figures, repossession statistics were published showing that the number of repossessions in the first half of 2006 was the highest since the first half of 2001. At 8,140 the number was also almost double that seen during the same period in the previous year.

So the Bank of England’s decision to raise the base rate seemed to be the last in a string of dismal news items for the mortgage industry. But if you look more closely at the figures, maybe things are not as bad as the headlines suggest.

The number of properties being repossessed is only a 10th of what it was at the worst point of the housing crash 10 years ago. And the increase is being attributed to increased payment problems that followed the rises in interest rates imposed between autumn 2003 and summer 2004.

One of the consequences of those interest rate rises was an upturn in the number of fixed rate mortgages being taken out. So holders of such products are protected from increases in interest rates such as the recent one. Many more people are shielded from interest rate rises than was the case two years ago.

Around half of all outstanding loans from building societies are now on fixed rates. This is the highest proportion for several years and shows that people are seeking to offset the risk of interest rate rises.

And it is not only those who are taking out fixed rate loans who are benefiting. With interest rates at a relatively low level, many people whose fixed rate mortgages end over the next few months will find that rates are lower than their previous fixes. They will be paying less than they were.

More good news provided by statistics is that the growth of unsecured lending has slowed in the past 18 months. This will further help home owners. Fewer borrowers paying off unsecured debts means they are better able to meet their mortgage repayments.

So investigation shows the financial news is not as bad as it seem but these figures should be seen as a shot across the bows. Like people going outside on a cloudy day, clients should take heed of the weather warnings and ensure they have a financial umbrella at the ready.

Recommended

TMP adds edeus to panel

The Mortgage Partnership has added edeus to its packaged panel. edeus, scheduled to launch next month, officially announced its initial chosen packager list last week.Products from the the highly anticipated new lender will be available for intermediaries fully packaged at TMP from launch date. TMP say edeus will offer an extensive specialist product range including […]

MSN continues to recruit ARs

Mortgage Support Network has confirmed it is not one of the four networks recently forced by the Financial Services Authority to stop recruiting appointed representatives until they get their systems in order. MSN says it continues to recruit ARs and is hoping to add 100 firms to its network over the next year.

Pink sees big rise in business for MPLC

Pink Home Loans has seen a substantial rise in packaged business for its lender partner Mortgages plc. Applications in June represented an increase of 155% compared with January’s figures and a 61% rise compared with the same period last year. Pink’s packaging department is working to a 24-hour turnaround on all new mortgage applications, post […]

Societies donated 5.8m last year

The Building Societies Association has revealed that 5.8m was donated to various causes through affinity accounts in 2005. The figure comes from the first research conducted into affinity accounts.

Embrace simplicity!

By Fiona Holmes, proposition communications manager When I first took out critical illness cover, I was overwhelmed. It wasn’t just the form filling, it was finding out about the sheer number of illnesses I was covered for. Did it give me peace of mind that I was covered for neuromyelitis optica or systematic lupus erythematosus? […]

Newsletter

News and expert analysis straight to your inbox

Sign up