The BBC reports that the FSA has implemented new poers to ensure that repossessions are now a matter of last resort for mortgage lenders:
Under the new rules for treatment of borrowers in arrears, the FSA is insisting that:
- firms must not apply a monthly charge where a repayment agreement for arrears is already in place
- any payments made by customers must be first allocated to clearing the missed monthly payments, rather than to arrears charges which can be repaid later
- repossessions should always be the last resort.
In addition, firms will be obliged to record all telephone calls with customers in arrears and keep them for three years.
However, these steps are unlikely to stop the flow of repossessions likely in the future.
What few commentators are speaking about at present is that we are continuing to live with record low interest rates, but that these will inevitably have to rise soon enough. The current mortgage standard of around 4% is likely to rise to around 7%-8% and this is when the pain will really start to hit.
Not only that, but we are likely to see the general economic slowdown and rising interest rates impact the property market, dragging it down, resulting in negative equity as a real sting for many consumers with a mortgage. We’ve already seen a report of house prices falling this week, and I would expect the issue to be compounded through this year.
