End-to-end approach will keep arrears low

At the end of last year, the Association of Residential Lettings Agents speculated that 2012 was likely to see arrears and repossessions rising in the private rental sector, mainly due to a predicted hike in unemployment.

Bob Young
Bob Young, Managing director CHL Mortgages

It is not a positive point to make at the start of the new year, especially when the buy-to-let and private rental sectors saw significant growth in 2011. But the point is a valid one and should ensure that those involved in the sector continue to tackle arrears and repossessions.

It is quality underwriting at the front end that will make the most difference. Our figures reveal that accounts with arrears of three months or less fell by 26% over the first 11 months of 2011, putting us ahead of our best-case scenario for the year.

This did not happen by accident and lenders have a part to play in ensuring these levels are sustained across the whole sector.

With new players expected to enter the sector this year and buy-to-let lending likely to rise, it has never been more important for the right message to be provided at the point of loan origination.

Strong underwriting and criteria will go a long way to ensuring today’s borrower is not tomorrow’s defaulter. And if accounts do move this way, lenders have to work with borrowers to find a solution.

Adopting this end-to-end approach should hopefully keep arrears and repossession increases to a minimum.