Level of mortage problems ‘unprecedented’ - CAB

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Over 200 Derry homeowners per month are seeking help to deal with mortage defaults and home repossessions.

The Citizen’s Advice Bureau in Derry deal with 60 requests for assistance per week from clients, “worried about losing their home, who have significant arrears or have already received notification of a repossession order being granted,” the Journal has learned.

The news comes after one of the UK’s leading mortage companies HML estimate a total of 2,540 homes are set to be repossessed across the North in 2011.

The company released the figure after a study of 320,000 live mortgage accounts.

The worrying situation is faced by Citizens’ Advice Bureau (CAB) Money Advice Supervisor, Liam Doran, on a daily basis. Mr. Doran described the recent rise in mortage difficulties as “unprecendented.”

The DETI-funded Dealing with Debt service handled over £2.5 million of mortgage debt, (NI wide) an increase of over 100% from the third to the fourth quarter of 2010.

“We are seeing more and more problems directly due to the cut in the interest rate support by Social Welfare. It was reduced to 3.63% in October. Help with mortage interest payments means more and more people are sliding into arrears.”

Mr. Doran continued: “We have also seen shortfalls between the original mortage and the resale value ranging from £1,000 - £130,000 in the past 12 months.

“When the house is sold, the client is still liable for the unsecured shortfall. Due to the high value of the shortfalls most people are forced into bankruptcy as they cannot afford to pay it back.

“This makes no sense whatsoever, if the banks and courts are evicting people from their homes they are then entitled to housing benefit support. That housing benefit is of a higher value than mortage interest rates.

“In the past four months from Nov 2010 we have dealt with £1,115,000 of mortgage related debt in Derry CAB alone. This is an unprecedented increase.”

In 2009/10 there was 5.4 million shortfall in mortage arrears as dealt with by CAB NI wide.

According to HML’s ‘Regional Repossession Forecast’: “Northern Ireland is expected to experience the worst rate of repossessions in the UK, with repossession rates significantly higher than other (UK) regions.”

Liam Doran added: “We feel that due to ongoing economic factors such as unemployment, public sector cuts, lack of activity in the housing market and reductions in benefits that the situation will continue to worsen over the next 12 months.”

If anyone is having problems with their mortgage payments, are facing repossession or have any other debt problems we would advise them to seek help sooner rather than later from the CAB.

They can be contacted on 02871370337 or on lderrymoneyadvice@citizensadvice.co.uk

A client of Derry CAB is a single parent with one child and her property is in negative equity.

She was getting help with her mortgage interest payments through her benefits but due to the reduction in the interest rate her monthly payments have increased from £85 to £200 per month.

She has now received notification for repossession from her mortgage lender. She came to the bureau for help on what to do if her property is repossessed and there is a shortfall.

The client has been forced into repossession by the reduction in the interest rate used to calculate help with mortgage interest payments through the benefits system.

Once the property is repossessed the client will have to go to the Housing Executive to get re-housed at a significantly higher cost to the benefits system than the help she was receiving through the Mortgage Interest Scheme.