Situation improving but banks must do more for those behind on payments
ON the face of it the arrears situation is improving. The numbers of residential mortgage accounts that are three months or more behind on repayments has fallen for the first time since the figures were collected.
This comes after almost four-and-a-half years of relentless rises in the numbers getting into mortgage trouble. So we have reason to cheer the first fall in the arrears figures.
In the three months to the end of December, close to 96,500 mortgage accounts were three months or more in arrears.
The figure had come close to 100,000 recently, and the fear was that we would have breached the psychologically important 100,000 mark before long.
Now it seems that the ongoing rise has been arrested. And there has been a drop in the numbers falling into early arrears – of less than three months.
However, we have gone through enough at this stage to be sceptical of bankers.
Yes, there has been an improvement in the numbers in early arrears and the numbers who are three months or more behind on their repayments.
But the same cannot be said for the numbers in long-term arrears.
Depressingly, the numbers of those who are two years or more behind on their mortgage repayments shot up in the last three months of last year, compared with the previous three months.
This is despite the fact that these are the very homeowners the banks have been ordered by regulators to offer solutions to in a bid to get them out of a mortgage mess.
Banks are taking the easy cases first and dealing with those.
They are offering most people in trouble an interest-only deal or arrears capitalisation – this is where the arrears are added to the overall mortgage principal and repayments are made on the new higher mortgage.
Not surprisingly, four out of 10 of those who opt for arrears capitalisation end up defaulting again.
Yet, the number of split mortgages being handed out is still less than 4,000.
At this stage the banks really could, and should, do a lot better for those in long-term mortgage distress.