Citizens Advice: FSAs research on mortgage arrears and lending

Sue Edwards Head of Consumer Policy at Citizens Advice said: "We welcome the findings of the FSA's research on lenders' mortgage arrears and lending practices, which mirror CAB clients' experience. Our 2007 evidence report showed that in some cases lenders have taken borrowers to court without exploring all the other options available to address the arrears resulting in excessive costs, stress and worry for borrowers. This could be avoided if lenders had acted in accordance with the FSA rules that govern arrears management practices. Bureaux also see cases where it appears that the lender had taken little or no account of the borrower's ability to repay the mortgage. The borrowers got into mortgage arrears and faced repossession.

"In the financial year 2006/07 Citizens Advice Bureaux in England and Wales dealt with over 57,000 problems about mortgage and secured loan arrears, an 11% increase on the previous year and these problems rose by 35% in the first two months of 2008 compared with the same period in 2007.

"We call on the FSA to take urgent action on the findings of their research if the worst consequences of the deepening mortgage crisis are to be avoided. We believe this should involve strengthening the rules on mortgage arrears and lending practices.

"We also call on the government to introduce a mortgage pre-action protocol as soon as possible to ensure that lenders only take possession action as a last resort. In the meantime it is vital that lenders treat their customers fairly and sympathetically and consider alternative options to ensure that repossession really does become a last resort."