Rising Repossession Orders Could Force More Homeowners Into Sale & Rent Back
Leading debt management provider welcomes planned legislation to protect homeowners
Following a report by the Office of Fair Trading (OFT) on the sale and rent back sector, the Financial Services Authority (FSA) has announced that it will be implementing regulation on sale and rent back firms from July 2009. But leading debt management provider, EuroDebt, is warning that despite further interest rate cuts in March that this may be too late for the many homeowners finding it difficult to make ends meet, with nearly 390,000 households already receiving repossession orders during the recession and millions of homeowners in serious financial difficulty.
The company is advising that homeowners looking for options to deal with mortgage repayments consider a Debt Management Plan which will prioritise repayment of their mortgage arrears and help them deal with their other unsecured creditors. Informing a mortgage provider that a professional debt advisor has been appointed and that a sensible offer is being made to either repay mortgage arrears or make reduced monthly contributions over an agreed payment extension period may be a viable option to prevent the repossession order in the first instance.
"Historically, homeowners have used remortgaging as a solution to tackle debts" confirmed Kevin Still, Director, EuroDebt. "But in the current credit-drought it is only those with pristine credit records who are able to use this option. Remortgaging declined by 26% from November 2008 to just 40,000 loans in December 2008 and there was a 33% drop year on year in remortgages for December 2008. Halifax have confirmed that the value of the average UK home declined by a further 2.3% in February. So, even with an individual who has a good credit history, if the value of their property has dropped to below the LTV threshold being imposed by lenders, they may find it difficult to get a good deal.
"For those facing particularly difficult financial circumstances the option of sale & rent back might be seen as a viable debt solution" continued Kevin Still. "This is especially the case where promises are made that individual's can rent the property back at an affordable monthly payment, with claims of reducing monthly outgoings by up to 50% not being uncommon. But whilst there are a number of reputable firms operating in this sector, homeowners need to be wary of the less-than-scrupulous operators, with the OFT reporting on tenants being evicted from their homes just months after selling their property at prices well below market value."
EuroDebt is advising anyone looking to enter a sale and rent back scheme to do their research and ensure that the company they are using is well known and highly regarded. Indeed, EuroDebt has regular experience of properly sold sale & rent back solutions which form an integral part of a sustainable Debt Management Plan.
EuroDebt aims to help consumers take a responsible position with their creditors, especially where they have multiple credit cards and loans, by notifying the unsecured lenders that the client has entered a Debt Management Plan. This involves no further borrowing and in the majority of instances lenders agree to freeze interest & charges, meaning that recovery activities stop with the result that the debt balance will begin to reduce at a rate based upon the negotiated reduced payments to creditors and the individual can begin to take control of their finances again. Payment proposals are presented to creditors in a consistent manner and all the figures quoted in the income and expenditure analysis will have been verified through a home visit conducted by a EuroDebt debt advisor.
A Debt Management Plan may be for a relatively short period ranging from 12 months to 3 years or a long-term plan that enables them to become debt free, potentially with some equity release for home owners in the future. The flexibility of a Debt Management Plan means that clients can resume contractual payments should their financial circumstances change for the better, for example they find new employment or return to work from long-term illness or maternity leave.
EuroDebt is the only fee charging Debt Management Company to make home visits as a core component of its 'fact find' process, ensuring a complete picture of each individual's situation. At this visit, the debt advisor is able to assess not only priority expenditure, like mortgage, rent, council tax and utilities, but any arrears on these payments. Repayment arrangements to clear arrears are a priority to protect a client's home and family. If critical insurances have been dropped, like life insurance and home insurance, then these will be re-prioritised. EuroDebt also provides Energy Switching Services to enable the client to save money on their energy bills and to accelerate the rate at which they become debt free.