The number of people losing their homes after failing to keep up with mortgage payments has nearly doubled, according to the Financial Services Authority.
In the third quarter of 2008, the number of possession orders that were granted by courts stood at 13,161 – up 92% from the same period in 2007.
The FSA also reported a rise in the number of people struggling to clear their mortgage arrears and in need of debt advice, stating that the number who were three months behind with their payments had jumped to 340,000. This was an increase of 24% from a the same period a year earlier and 10% higher than in the previous quarter.
The government has outlined many debt help initiatives to assist those struggling with their mortgage payments, and many charities and debt organisations are also offering free debt advice.
Despite the interest rate falling to record low levels, people are still in need of debt help solutions, like debt management plans and IVAs (Individual Voluntary Arrangements) to help them cope with their household finances.
Debt help solutions offer vulnerable people the opportunity to regain control of their finances whilst still repaying their creditors, but enable balances to be paid off at a rate that is more affordable. Informal debt help solutions, like debt management, are fairly flexible and allow repayments to change in line with their current circumstances.
Debt management can also usually be stopped at any time, if the debtor finds themselves in a better financial situation – i.e. following re-employment, a pay rise or promotion.
IVAs are a more formal debt help solution, and unlike debt management require a qualified insolvency practitioner to draft a legally binding contract with creditors. The insolvency practitioner will offer free debt advice and, if appropriate, recommend an IVA.
An IVA is usually for a set period (normally 5 years), and once the IVA is complete all unsecured balances are effectively written-off and the debtor is debt free.
The FSA also pointed out that 2.9% of all mortgage holders were now in arrears – with those who had fallen behind only managing to pay 42% of their normal mortgage payment on average.
Debt help solutions (like debt management and an IVA) enable mortgage payments to be ring-fenced from separate unsecured balances, giving them priority over unsecured debts, meaning that homeowners on a debt management plan or IVA can maintain their mortgages without falling behind with payments.
