View more on these topics

Lenders are getting the balance right with falling arrears

Arrears and repossession are slowing but lenders must not rush to loosen their criteria when conditions change


When we discuss arrears and repossession levels it seems disingenuous to talk about positive signs, given that individual stories lie behind all the figures that have added up to make them such a statistic. But figures recently published by the Council of Mortgage Lenders show that the level of both repossessions and loans in arrears have been falling over the past year.

Our own arrears figures continue to fall substantially over the same period, and there is no reason to suggest they will do anything different in the months ahead.

There are several reasons for the fall, notably the Bank of England base rate being so low over such a long period, which has kept the cost of borrowing down.

Most lenders have also reappraised the way they handle arrears, putting much more emphasis on keeping borrowers in their homes.

We constantly work on maintaining the lines of communication between ourselves and borrowers to ensure any problems are flagged up early, solutions are agreed and we maintain the loan agreement with the client.

The positive statistics on both arrears and possessions seem to show that at present most of the lending community has the balance right.
The credit teams, rather than the origination department, now hold sway over lending policy, so credit quality is by and large good.

Brokers may express frustration at the strictness of lenders’ criteria and may call for them to be loosened, but that is both unlikely and undesirable.

Yet it would be naive to think that it will always be like this. The future may turn out to be a different beast, particularly if competition continues to increase.

We should not return to irresponsible lending just because competition for business is increasing

It will be at this point that we will truly discover if lenders have learnt any lessons from the past.

Will the strict disciplines that lenders currently have remain in place? Or will they fall back into old habits and kid themselves that, for example, the credit quality of a first-time buyer is so good that they can self-cert or fast-track them at a low price?

While lending decisions are steered by the credit team, this type of example is strictly off the agenda. But we should not believe that the discussion will never be undertaken. And it may well be at this point that the arrears axis might shift.

We should also not forget that this is an exceptional time for lenders owing to the forbearance policies that they have in place.

While today lenders are choosing not to take properties into possession, this will not always be the case. A day of reckoning on this issue is likely to occur in the near future for many borrowers.

We should certainly not exacerbate this with a return to loose criteria and irresponsible lending just because competition for business is increasing.

We must recognise the human cost of a wrong decision before loans are agreed or we are destined to see arrears and repossession levels back on the rise sooner than anticipated.



Poorly thought out packs bite the dust

It’s good to feel that some sanity has at last been restored by the new government. Home Information Packs will be scrapped – and about time too. Full of promises of speeding up and simplifying the buying and selling process, they always made us sceptical. And sure enough it’s all been a waste of time […]


A third of renters believe they will never buy

A survey of 1,326 UK renters by flat and house share website, shows that a significant number – 33% of people currently renting don’t believe they will ever be able to afford to buy a property.

Strong dollar can be a powerful driver of UK dividend growth in 2015

By Robin Geffen, fund manager and CEO 

This year threatens to be a challenging one for UK dividend hunters. Last year saw an all-time record amount paid out in UK dividends — some £97.4bn, according to research from Capita Dividend Monitor. Yet as Capita also pointed out, out the biggest single factor driving the growth in the fourth quarter of last year was easy to identify: the rising US dollar. 

In our view, this trend is much more than simply a one-quarter phenomenon. It is actually the most profound issue to get right as a UK equity income investor in 2015. We believe that the US dollar will continue to strengthen significantly from its current level. This is due more to the US economy’s demonstrable de-coupling from the rest of the world than to a view on the UK. The US has a strong chance of tightening monetary conditions this year without jeopardising growth or de-stabilising its housing market. The same can unfortunately not be said about the UK.


News and expert analysis straight to your inbox

Sign up