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.”