Customers in ‘serious’ mortgage arrears surge this year

While Council of Mortgage Lenders data yesterday (13 November) showed that repossessions and mortgages in arrears figures have dropped again, new data has shown the number of mortgages in ‘serious’ arrears has jumped 20 per cent since the first quarter.

Third quarter data from mortgage debt rehabilitation provider Ascent Performance Group revealed the average mortgage debt owed by homeowners who have fallen into ‘serious’ arrears is £7,021.

Compared to the second quarter this represented only a 1.1 per cent rise, but that figure is up 20 per cent on the £5,584 average owed in the first quarter.

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Serious arrears are defined as when borrowers have defaulted on monthly payments for approximately six consecutive months. At this point many lenders pass these customers onto debt rehabilitation specialists to help recover the money they are owed.

The statistics suggest that despite overall economic improvement, with the number of people in mortgage arrears falling compared to this time last year, there is a group of people for whom the position is hardening.

However, CML’s data showed that arrears and repossession levels have dropped to their lowest level since 2008.

Mark Higgins, chairman at Ascent Performance Group, explained that in recent years mortgage lenders have given customers more time to settle arrears problems before passing them onto debt specialists, especially since the introduction of the Mortgage Market Review.

“However, if they can’t make contact with the customer then their debt will naturally increase before we are instructed.

“Therefore, it is our job to make contact with these customers and agree affordable, long-term repayment plans that divert the danger of possession.”

Based on the firm’s research, the ‘serious’ mortgage arrears hotspots are Warrington, Walsall and Preston, where residents in this category owe an average of £14,073 each to lenders.

Of all customers who have fallen into serious arrears in the third quarter this year, over half have begun to positively resolve their situation.

Of these, 33 per cent managed to set up a suitable repayment plan or cleared their debt in full, whilst 24 per cent have paid off some of their debt to reduce arrears owed to the equivalent of less than three monthly payments. The remainder have been unable, at least as yet, to find a solution.