Some lenders still not doing enough to prevent repossession

New research by leading advice agencies shows mainstream lenders' practices have improved, whereas some lenders are still not fully using Government schemes to help struggling homeowners, in particular those in the sub-prime and second charge sector.

AdviceUK, Citizens Advice, the Money Advice Trust and Shelter have conducted a survey of their advice experts to see how Government mortgage repossession schemes are working on the ground.

The survey has found that while 51% of advisers surveyed reported an improvement in mainstream lenders practices since the Pre Action Protocol came into force, only 20% of advisers report that sub-prime and second charge lenders' arrears collection practices have improved since the new guidance for judges was established.

National Debtline also conducted a survey of its clients, which reflects the experiences of advisers. 58% of callers in arrears with their first charge loan said the solution offered to them by their lender was affordable when told about repayment problems. This contrasts with only 39% of callers in arrears with their second charge loan who were offered an affordable solution.

AdviceUK, Citizens Advice, Money Advice Trust and Shelter are calling on all lenders to fully comply with the Pre Action Protocol and industry guidance to help prevent rising repossessions.

The surveys come ahead of new repossession and mortgage arrears figures due out today from the Council of Mortgage Lenders and the Ministry of Justice. Other findings from the adviser survey include:

74% of advisers agree that following the launch of the Pre-Action Protocol judges are asking more questions about lenders' attempts to reach the borrower before taking court action (compared to 24% who disagree)

46% of advisers surveyed report no real difference in lenders' practice following the changes to Support for Mortgage Interest; yet

30% report that lenders are less likely to proceed with possession action through the courts following the changes to Support for Mortgage Interest

80% of advisers surveyed report that clients move into the private rented sector following repossession

82% of advisers report that clients need debt advice after being repossessed.

Joanna Elson, chief executive of the Money Advice Trust said: "Money Advice Trust applauds the improvements that many lenders have made in their practices. In the current climate, where 800 repossessions happen a week, it is vital that lenders adhere to the standards in the protocol. I welcome the fact that 51% of those surveyed found mainstream lenders' practices have improved; clearly we need to ensure that this applies to all lenders.

"One of the findings was that a major obstacle to accessing the government mortgage to rent scheme was the bar on those with negative equity; and we therefore welcome the Government's announcement in the Chancellor's Budget that this scheme will now apply to those in negative equity."Citizens Advice

Chief Executive David Harker said: "The results of these two surveys show that currently, mainstream lenders are doing much more to help struggling homeowners than sub-prime and second-charge lenders. We want all lenders to be doing as much as possible to prevent people losing their homes. This means providing an understanding and constructive response and helping their customers come to a manageable solution.

Citizens Advice Bureaux in England and Wales saw a 49% increase in the number of new enquiries about mortgage and secured loan arrears last year. People who are struggling to pay their mortgage should speak to their lender straight away and seek advice."

Steve Johnson, chief executive of AdviceUK said: "The members of the AdviceUK network have reported a significant increase in the demand for debt advice over recent months, especially from homeowners who have either been made redundant or made to reduce their working hours.

"The Government's initiatives aimed at helping homeowners who are experiencing financial difficulties are therefore very welcome. It is clear from the research, however, that some lenders could do a lot more to help borrowers remain in their homes.

"Advisers are also struggling to cope with this increased demand for debt advice. I hope that the Government recognises that additional resources are needed across all parts of the free money advice sector to ensure that all clients receive the advice and support they need, not only in the current economic climate but in the long-term too."

Sam Younger, chief executive of Shelter said: "The research paints a mixed picture of how lenders are reacting to Government schemes to help homeowners. Unless all lenders urgently sign up to and consistently implement these or equivalent schemes and strictly adhere to the pre-action protocol many people will fall through the gaps and repossessions will continue to rise.

"The demand for advice services like ours has never been greater but we urgently need the Government to provide further resources for vital debt advice, so that everyone can get free advice when they need it. In the meantime we would urge people to contact their lender for advice."