Statistics Reveal Growing Effectiveness Of Mortgage Arrears Home Visits

UK HOMEOWNERS who have fallen behind with their mortgage payments are now significantly more likely to pay off some or all of their arrears than two years ago - according to the latest research by national law firm Irwin Mitchell.

The comprehensive study carried out by Irwin Mitchell’s field agency business, Ascent, analysed data from over 12,500 households which have missed monthly mortgage payments and subsequently received a mortgage arrears home visit on behalf of their lender.

Irwin Mitchell’s Domestic Arrears Report revealed that out of those who had defaulted on their mortgage and received a home visit during Q2 of 2011, over half (51.5%) paid off all or some of their arrears. This represents a 7% increase compared to the same quarter in 2010 and a significant 43% rise from two years ago when just over a third (36%) made a contribution.

Significantly, those who have fallen behind recently are also paying back larger chunks of their defaulted debt. Out of the 2,476 who received a visit or telephone call from a counsellor during Q2 of 2011, 37% paid an amount back equivalent to more than one month’s mortgage - twice as high as the proportion who did so two years ago. In 2009, 0.9% cleared their arrears completely whilst most recently this figure reached 2.7%. 

Commenting on the findings, Niall Gilhooley from Ascent, explained: “Although our research points to a large number of people who are struggling with their mortgage, there are some encouraging signs in terms of the effectiveness of home visits and the amount of money people are able to pay in order to settle their arrears. Household incomes are under significant pressure from all sides but it appears people are determined to do all they can to work with their lender in order to safeguard their home.”

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.

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 Q2 of 2011, over half made a contribution to paying off their mortgage arrears. 2.7% were able to clear their arrears immediately compared to 0.9% two years ago.
• 37% of mortgage defaulters who received a counselling visit in Q2 of 2011 paid back all or more than their monthly amount. Twelve months ago the figure stood at 33%.
• The number of cases where a mortgage arrears home visit resulted in no financial arrangement being reached has fallen by 50% over the last year. In Q2 of 2010, 10.2% of cases resulted in no agreement however most recently this fell to 5.9%.
• Two thirds of mortgage defaulters accepted a visit from a debt counsellor in Q2 of 2011. This is slightly up on the previous quarter and reflects a significant rise compared to the Q3 and Q4 of 2010 where it was 52.8% and 51.9% respectively

Mr. Gilhooley from Ascent added: “It will be interesting to see what will happen in the final quarter and next year but the signs are that this upward trend with repayments will continue for at least the next three months.

“I certainly expect mortgage lenders will continue with their policy of forbearance and that repossession of homes will continue to be the absolute last resort, where all other efforts to engage with the customer have failed. When this approach is combined with the growing number of people out of work, costly utility bills and an inflation rate of over 4%; I think it’s highly likely that a mortgage arrears home visit will become more widespread.” 

About the Research

Irwin Mitchell’s Domestic Arrears Report analysed the behaviour of 12,687 households during a two year period from the start of July 2009 until the end of June 2011. Each household included in the study had missed a number of monthly mortgage payments and subsequently received a debt counselling visit on behalf of their lender to discuss how the arrears could be repaid.