Majority Of UK Mortgage Defaulters Are Now Paying Off Debt

Report Reveals 38% Improvement In Recovery For Lenders

13.02.2012

More than half of UK homeowners who have fallen behind with their mortgage, paid off some or all of their arrears in the three months leading up to the end of last year - according to the latest research by national law firm Irwin Mitchell.

The comprehensive ‘Domestic Arrears Report’ carried out by Irwin Mitchell’s field agency business, Ascent, analysed data from over 18,000 households which have missed monthly mortgage payments and subsequently received a mortgage arrears home visit on behalf of their lender.

During the last three months of 2011, 52.3% of households who had previously defaulted on their mortgage, made some contribution towards paying off the debt. This compares to 37.7% of homeowners who did the same during the Q4 in 2010 – representing a 38.7% improvement.

Significantly, those who have fallen behind with their mortgage are also now paying back larger chunks of their defaulted debt.

Out of the 2,862 who received a visit or telephone call from a counsellor during the last three months of 2011, almost 41% paid an amount back equivalent to more than one month’s mortgage payment – representing a significant rise on the 31% who were able to do the same during Q4 in 2010. Only 27% paid this amount in the last three months of 2009.

In 2009, just 1% cleared their arrears completely. Most recently however, this figure reached 3.3%. 

A summary of the key findings contained within Irwin Mitchell’s Domestic Arrears Report include:

- Out of those who accepted a mortgage arrears home visit during Q4 of 2011, over half made a contribution to paying off their mortgage arrears. 3.3% were able to clear their arrears immediately compared to 0.9% two years ago.

- 37% of mortgage defaulters who received a counselling visit in Q4 of 2011 paid back all or more than their monthly amount. Twelve months ago the figure stood at 27%.

- The region where the most household debt was repaid was in the South East where 54.1% of defaulters paid back some or all of their missed mortgage payments. The region where the least amount of mortgage debt was paid back was the East Midlands (48.4%).

- The number of cases where a mortgage arrears home visit resulted in no financial arrangement being reached has fallen to 4.7% in the most recent period. The proportion who failed to reach an agreement in Q4 in 2010 was 6%.

- 5.6% refused counselling however during the final quarter of 2011 – the highest proportion since Q1 in 2010.

Commenting on the findings of the survey, Niall Gilhooley from Ascent, said: “Although the last few months of the year are traditionally the most expensive for households, it appears that the proportion of people paying down debt was up compared to a year ago and very similar to the previous three months.

“These results certainly paint a brighter picture for lenders, however they also perhaps say a lot about the economy at the moment. Faced with an uncertain economic picture, homeowners appear to be clearing their debts on their home before they spend in other areas.”

Home visits are carried out on behalf of most mortgage lenders after a household has defaulted on their mortgage. During the visit, or phone interview, counsellors discuss the outstanding arrears and aim to develop a sustainable and affordable payment plan for clearing the debt.