Last updated: 30 August 2017
At a glance
- Following the financial crisis at the end of the last decade, a larger proportion of mortgage borrowers were struggling to keep up with their payments. Because of subdued house prices, mortgage lenders exercised extended forbearance, allowing some customers additional time in order to recover their financial position.
- The number of properties taken into possession in 2016 declined by almost 25%, according to Council of Mortgage Lenders data. 2016's total of 7,700 cases of possession compared with 10,200 in 2015, and was the lowest number since 1982. Over the course of 2016, the number of mortgages in arrears also fell by 7%.
- The number of mortgages in arrears of 2.5% or more of the outstanding balance declined to 88,200 in the second quarter of 2017, the lowest level since at least 1994 when this run of data began. The total was 5% lower than in the first quarter (92,600) and amounted to 0.8% of the more than 11 million mortgages outstanding in the UK.
- The number of properties taken into possession also declined in the second quarter from 1,900 to 1,800 (accounting for 0.02% of all mortgages). The total was the same as in the final quarter of 2016, and is the lowest figure since quarterly data was first published in 2008.
- Because some aspects of UK law are devolved, the court process when a lender seeks possession of a property is different in Scotland and Northern Ireland.
- For residential mortgages, lenders are required to follow certain steps when a borrower falls into arrears. Before they seek possession of the property, lenders must demonstrate that they have done everything which they are required to do under the FCA’s Mortgage Conduct of Business (MCOB) rules (MCOB13), to make possession a matter of last resort. This is known as meeting pre-action requirements.
- For buy-to-let mortgages which are not regulated by the FCA and where the borrowers’ own home is not usually at risk, lenders may appoint a Law of Property Act Receiver in England and Wales, in the first instance, to determine if the landlord can recover their position. Lenders always take into account the position of tenants and will not act unreasonably.
- Lenders should note that The National Homeless Advice Service (NHAS) has produced guidance for homeowners on their website.
We believe that the regulatory rules which are in place, in some cases, do not benefit UK consumers, as they have led to differing approaches to the recovery of money depending on the financial product.
For example, a borrower in default on an unsecured loan will receive a different experience to a borrower who defaults on a secured loan. Often, it is the case that secured loan providers tend to take a longer term view, whereas in other instances the desired outcome by the creditor is immediate payment. We believe the FCA should make adjustments in order to streamline processes across financial products.
We recognise that people’s homes are at risk and that is why our members offer forbearance, which can take a number of forms, to help to enable people to get back on track. Our members will never refuse to offer assistance; and borrowers are encouraged to contact their lenders regarding potential payment difficulties as the earliest opportunity.
Our members often have relationships with free (to the customer) and independent third-party debt advice providers, who can work with the lender on behalf of the borrower to avoid them losing their home. These providers are regulated by the FCA and represent the interest of customers, not creditors.
Why this is important for lenders
This aspect of mortgage lender activity is tightly regulated and controlled. Lenders are also required to report the performance of their mortgage books to both the Conduct and Prudential regulators (FCA and PRA).