Banks and lenders forced to become more responsible

Article Written By: BrookeWebb

The Financial Service Agency is proposing new plans to force banks and mortgage lenders into becoming more responsible for assessing a borrowers ability to repay a loan. Seeing as it was sub-prime mortgages that got us into this mess, this move has been welcomed by debt advisory groups.

Banks and mortgage lenders are to be forced into becoming more responsible for assessing a borrowers ability to repay a loan under new plans being proposed by the FSA. Sub-prime mortgages drove us into a global recession, so this move has been widely welcomed.

According to Credit Action, consumer debt is increasing and people continue to fall into arrears on their mortgage repayments, so much so that a property is now repossessed every 11.5 minutes in the UK. The Governments aim under this new plan, is to abolish 100% or even 125% mortgages which banks had knowingly been giving to consumers they knew might fall into areas.

If you fall into debt and are in arrears on your mortgage repayments, what should you do? To start with, your bank should be your first port of call. How flexible and agreeable they are will depend on the type of mortgage you have, how much you owe and whether you have a regular bank account with them. Many mortgages let you pay off more or less each month as long as after a specific time period you have paid off an agreed amount.

Bear in mind however, a mortgage is secured against your property, so if you fall into arrears you could lose your home. Therefore, paying off a mortgage that is in arrears is more important than paying off any other debt.

If things get really dire, you should see a specific debt advisory group. More charities and debt agencies have sprung up since the start of the recession offering advice and help. They will develop a debt management plan, advising you on how to prioritise and consolidate debt, allowing you to better manage your finances and pay everything off over a longer term at a more affordable rate.

You may also want to look into the Government backed Homeowners Mortgage Support scheme if you need advice and assistance. Under this scheme you can put off paying some of your monthly mortgage payments for up to two years. Although you still have to pay the money back, including interest, it will give you some time to get back on top of all of your other debts.

About the Author

Kristan Brangers has recently been looking into debt help offered by Baines and Ernst and is now creating a debt management plan.

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This Article Has Been Published on Mon, 14 Dec 2009 and Read 193 Times

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