Resolution offers hope for struggling mortgage-holders

STRUGGLING mortgage- holders who take part in a new resolution scheme with banks won’t be hit with penalty interest or arrears charges.

The Government said yesterday it had accepted all 41 interim recommendations of an advisory group on mortgage arrears and it expects the country’s main banks to do likewise.

However, no debt forgiveness measures have been recommended, meaning mortgage-holders won’t see any of their debt written off.

Instead, the group proposes a “mortgage arrears resolution process (MARP)” to assist homeowners struggling to meet repayments.

Borrowers will be urged to contact their lender from the moment they realise they are in financial trouble and before arrears actually develop.

The MARP will then be implemented provided the bank believes the borrower will eventually be able to repay the mortgage.

The advisory group’s key recommendation is that banks “must not apply penalty interest or arrears charges” to borrowers who take part in the MARP.

In addition, it will require that banks “not encourage borrowers to change mortgage products, such as low-cost trackers, if it would put the borrowers at a financial disadvantage”.

This is aimed at ending the practice whereby some banks switch borrowers on to mortgages which cost more in the long term in return for a period of grace in the short term.

Banks will be requested not to use the MARP to “transfer borrowers to less favourable terms”.

The key underlying principle of the MARP will be to ensure borrowers remain in their homes “in so far as it is feasible”.

But those with large mortgages that have little chance of repaying still face losing their homes.

The group said some mortgages would be “unsustainable” and therefore unsuitable for the MARP: “Where it is concluded that the mortgage is unsustainable, then forbearance is unlikely to be appropriate and voluntary surrender may be necessary.”

The existing moratorium before banks take legal action to repossess homes will not be extended beyond 12 months. The group said it will examine “options” for borrowers with unsustainable mortgages in its final report due in the autumn.

For yesterday’s report, it said it focused only on actions capable of implementation “in a relatively short timeframe”.


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