One in six customers with an HBOS mortgage were in negative equity on their loans at the end of 2008 according to latest figures.
The UK’s biggest mortgage lender’s annual results showed that almost 17 per cent of their customers with homeowner loans owed more than their home was worth in December.
Many had taken out mortgages of 125 per cent of the property’s value at the height of the housing boom, and have seen values plummet by over 20 per cent.
The company also saw the number of people defaulting on their accounts rise sharply in 2008. As mortgage options have decreased for people wishing to re-mortgage, the trend in defaults looks set to continue – as many customers see their payments increase as they fall onto the lender’s standard variable rate.
This may mean that households see their disposable incomes falling, as their mortgage deal comes to an end, putting further strain on already overstretched finances.
Debt help organisations have seen their services in high demand, as people with debt problems look to get out of debt.
Many offer free debt advice which can help alleviate financial issues, with some companies offering useful solutions – such as debt management plans and IVAs (Individual Voluntary Arrangements).
These solutions usually enable balances to be repaid at a more affordable rate, helping customers regain control of their finances.
Debt management is a flexible and informal solution, as payments can be altered in line with changing financial circumstances. A customer is generally not tied-in to a contract, which can be useful in the short-term to stabilise balances.
An IVA is a more formal debt help solution, which involves a qualified insolvency practitioner. They will offer IVA advice before setting up the arrangement, and providing ongoing support throughout the term (usually five years). Once an IVA is complete, all remaining unsecured balances are effectively written-off and the client walks away debt free.
Reputable companies offering a full range of debt solutions include Chiltern Debt Management, Hamilton Locke and The Debt People. Their IVA advice is free and they can recommend a suitable way to get out of debt, that’s specific to the individual’s needs.
