Lenders slammed for extra arrears charges

23/02/2009

Some mortgage firms are charging £50 per month for customers who fall into arrears on their repayments - dramatically worsening some people's personal finances.

Nationwide charges £20, Halifax and Abbey £35 and GMAC £50 per month for customers who fall behind, the BBC reports.

However, lenders claimed that these fees reflect the extra administration costs they have to bear from customers in arrears - meaning that they are not unfair.

Speaking to the broadcaster, mortgage holder Maxy Maher said that her extra charges significantly damaged her prospects of getting back on track, once she had fallen behind.

"With every £30 which gets added on, the cost becomes greater and it becomes more difficult to catch up," she said.

Peter Tutton, a policy adviser at Citizens Advice, added: "We think it's very unfair that people in financial difficulty are being charged just for being in arrears.

EuroDebt director Kevin Still commented: “Where a client has gone to their mortgage provider and demonstrated that they can’t meet contractual payments and have discussed and agreed an equitable repayment arrangement based upon what they can afford then I think it is unreasonable to levy an additional financial penalty of up to £50 per month, which may end up being the reason that the repayment arrangement fails or is terminated by the lender.

"In most instances interest charges are being wrapped up over a longer period of time and payments to the mortgage provider are prioritized, reducing their short-term risk.”

The City regulator, the Financial Services Authority, is currently reviewing the arrears charges and will publish its findings later in the year.

Tags; Housing Debt and Bills, Young Family Finances,

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