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Tens of thousands face repossession under EU financial stability rules

Lenders could be forced to repossess tens of thousands of homeowners under new EU rules cracking down on forbearance in a bid to boost financial stability.

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In final negotiations over CRD IV earlier this month, ministers, MEPs and European commissioners agreed to define a mortgage default limit of 180 days, doubling initial proposals for a 90 day limit.

Debt charity Revival Repossessions estimate homeowners in arrears of more than 180 days owe around 2.5 per cent of their property value. Council of Mortgage Lenders’ figures last month show 157,900 homeowners in arrears of 2.5 per cent of their property value or more.

Speaking to Money Marketing, Conservative MEP and lead CRDIV negotiator Vicky Ford says she fought hard to increase the limit from the original 90 days.

She says: “At 90 days you effectively start a process of bringing the bailiffs in after two missed mortgage payments.

“The large majority of people who miss two mortgage payments get back into full payment and do not need their keys taken away. It could be because someone has lost their job or a death in the family, it does not mean they are insoluble. It was an utterly critical point and we fought really hard for it.”

A British Bankers’ Association spokesman says: “The industry was keen that a 180-day definition of default was included instead of a 90-day definition so borrowers get more time and forbearance on financial matters to ensure they are not removed from their home. We are very pleased it has been changed and it is very much in the consumer’s interest.”

John Charcol senior technical manager Ray Boulger says: “A 90-day limit was clearly ridiculous but even 180 days is a blunt instrument and only a win for the UK because the original rules were so stupid.

“Any rules that ignore loan-to-value ratios do not seem sensible.”

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  • Huw Thomas 20th March 2013 at 2:12 pm

    Yet another reason to vote UKIP!

  • peter 19th March 2013 at 10:36 pm

    I switched my mortgage from repayment to interest only when the crash came, so is some European pillock going to argue next that I’m in arrears? Where will their interfearence end, borrowers are individuals, lenders need the abilty to deal with their clients on a case by case basis and not be dictated to from brussels. For my part I’ve decided to stay interest only even though I could afford repayments again, I find it gives me flexability and choice i.e. lump sum repayments when it suits me.
    Lets keep decisions about our mortgages in our hands and tell Europe where to get off!

  • ADD 15th March 2013 at 3:15 pm

    A good point, but equally continued excessive forebearance does not do anybody any good in the long run. There is always a point of no return that cannot be recovered from.

  • terry 14th March 2013 at 1:56 pm

    Why oh Why do we let the EU interfere with us again. It should be up to the lender how much lee way is given(in addition to the 180 days) Everybody loses if a property is repossessed. This will not improve financial stability whatsoever, but will destroy families. There may have been some serious errors over lending in the past, but overall since mortgages began they have been an opportunity. Like the FSA these people making the rules have no idea what it is like to lose your job and try and find work in the present climate. They know they are safe and sound sat in the ivory towers in the EU