Brokers can play key role in mitigating rising arrears and possessions

Intermediaries believe they have a role to play in helping to manage arrears and possesions by providing advice and counselling to borrowers, and helping them to liaise with their lender, according to the Intermediary Mortgage Lenders Association’s (IMLA) latest survey.

48% of respondents to the survey of 286 brokers embraced the idea that intermediaries can support borrowers in difficulty – although a significant minority of 38% said it’s not our role. The remaining 14% did not express a view.

Of those who felt they had a role to play, the most commonly mentioned factors were by providing the client general advice or helping to liaise with the lender, followed by helping to find a cheaper source of borrowing and checking affordability.

The key to enabling them to provide this kind of support is early notification of the problem by the lender – mentioned by 57% of respondents, and by far the most important issue cited by intermediaries. A small percentage (9%) considered that lenders should pay brokers fees for arrears counselling.

Peter Williams, IMLA’s executive director, comments: “Many, but not all, intermediaries are keen to play a more proactive role in supporting borrowers who may get into financial difficulty, seeing this as an integral part of the service they provide their customers over the long term. They are able to provide a higher level of expertise and independent advice to borrowers than they could find elsewhere. Lenders generally will welcome the greater involvement of brokers, although it must be stressed that for borrowers who are struggling to pay, dialogue with their lender is essential. Hoping the problem will go away won’t help anyone.”

Asked about their expectations for arrears and possessions, the majority (52%) of intermediaries thought arrears will be a little higher (up to 10%) in 2008, and a slightly smaller percentage said possessions would rise slightly. Just 17% thought the increase in arrears would be 11% or more, and 20% predicted that possessions would rise by a similar percentage of 11% or more. Inevitably, intermediaries expected sub-prime to see greater increases in arrears and possessions than the rest of the market. On average, intermediaries expect arrears to rise by 6% and possessions to rise by 7% in the mortgage market overall, but the increase is forecast to be 12% and 13% respectively for sub-prime.

Peter Williams concludes: “Intermediaries’ views on the market seem more or less in line with IMLA’s. Some increase in arrears and possessions is possible and indeed likely, as a minority of borrowers experience pressure on their finances. However, we do not anticipate a severe correction and the vast majority of borrowers will be able to adjust their finances accordingly and continue to meet their monthly mortgage payments – and brokers can help by providing advice and reinforcing the message that a homeloan must be treated as high priority.”