Holistic approach needed for debtors

Mortgage arrears and repossessions are likely to reach record levels in 2009. For those who were advising debtors in the late 1980s and early 1990s there is a sense of déjà vu.

The objective of lenders should be to prevent as many repossessions as possible. But based on our experience of helping clients with mortgage arrears, unless their total debt problem is dealt with, the chances of arrears repayments being adhered to are reduced.

The average Paymex client who has mortgage arrears also has over £40,000 in unsecured credit debts, most of which will not be owed to the mortgage lender.

We are piloting various holistic solutions for mortgage lenders faced with clients who have multiple debts. Often the unsecured debts impinge on their ability to repay their mortgage arrears.

Unsecured creditors, particularly debt collection agencies that have bought the debt, take a more robust approach to debt collection than the majority of mortgage lenders. As a result we see many home owners repaying unsecured creditors in preference to their mortgage and any arrears.

Mortgage lenders should be under no illusion about the pressure their customers come under by unsecured creditors and how this affects their prioritisation of mortgage repayments.

Unless a holistic approach to debtors’ financial situations is taken, mortgage default is much more likely.