A recent report by the Citizens Advice Bureaux has warned that many people are being encouraged to enter into mortgage agreements that they simply cannot afford, particularly those on low incomes. This is leaving many homeowners facing a tide of mounting debts and a worrying rise in the amount of people being made homeless after having their home repossessed.
The Bureaux has said that one of the main culprits behind this rise in repossessions are the lenders themselves, with many of these waging a campaign of aggressive mortgage arrears recovery after making irresponsible lending decisions in the first place.

The group also warned that systems and regulations set up to protect the most vulnerable borrowers were failing.
It also said that many people on low incomes also rely on information given by brokers and in many instances this information has been poor resulting in a growing number of people taking out an inappropriate mortgage they cannot afford in the long term, with people who buy their council house being singled out as given particularly bad advice.

“With some brokers encouraging people to exaggerate their income, in some cases also supplying false personal information, and lenders not even carrying out the most basic of checks to see if borrowers can afford the repayments once the initial fixed-rate or discount has finished, it is easy to see why we have dealt with more than 57,000 enquiries in connection with mortgage or secured loan arrears”

This report comes on the back of a recent statement by David Cameron who has said that lenders need to do more to help homeowners who are facing large increases in mortgage repayments after their initial “honeymoon” period was over.

He also said that many of the estimated 1.4 million people who are coming off their fixed rate deals in 2008 could face an increase of up to £200 a month in their mortgage repayments, and that this is likely to be the “final straw” for many homeowners, resulting in unprecedented levels of repossessions.

Mr Cameron’s warning came at the same time as the Council of Mortgage Lenders announced that the average first time buyer now spends 20.6% of their income in paying mortgage interest alone.

Speaking prior to a meeting with the Council of Mortgage Lenders he said was encouraged by the actions of some lenders who had already taken steps to ease the transition of borrowers coming off fixed-rate deals.
He added “I am today calling on every lender to do everything they can to help reduce the risk of financial distress in the coming months.”
“I want to see the banking industry step up to the plate, and help ease the burden on hard pressed homeowners.”

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