Raise Your Guard or Endure a Battering – Potential Dangers of the Mortgage Business
Raise Your Guard or Endure a Battering – Potential Dangers of the Mortgage Business
Free Online Articles Directory
Why Submit Articles?
Top Authors
Top Articles
FAQ
ABAnswers
Publish Article
0 && $.browser.msie ) {
var ie_version = parseInt($.browser.version);
if(ie_version Login
Login via
Register
Hello
My Home
Sign Out
Email
Password
Remember me?
Lost Password?
Home Page > Writing > Non-Fiction > Raise Your Guard or Endure a Battering – Potential Dangers of the Mortgage Business
Raise Your Guard or Endure a Battering – Potential Dangers of the Mortgage Business
Posted: Dec 15, 2006 |Comments: 0
|
]]>
The Council of Mortgage Lenders Repossession Risk Review shows a significant rise in the number of repossessions and mortgage arrears. Numbers of people with arrears of more than six months rose to 46,290 in the second half of last year, up from 38,130 in same period in 2004. That is a jump of nearly 21 per cent.
Arrears of more than 12 months grew 23 per cent in the same period. At the same time, there has been a marked decrease in the stimulus provided by mortgage brokers and IFAs, provoking customers to review their financial commitments.
Let us get the numbers into perspective. The total number of borrowers with arrears of six months or more represents just 0.4 per cent of total mortgages in the UK, but it is a significant number.
The CML draws some comfort from this being a historically low number, but the underlying picture may be a lot worse due to two factors.
First, strong house price inflation over the last decade, has meant lenders could take lenient arrears management policies. Second, low interest rates and aggressive lending programs have pushed lending levels to new highs. Getting credit has been free and easy, well almost free.
There is a clear correlation between mortgage payment problems and households that have a high loan-to-value ratio. Last year the ratio of households with a LTV greater than 100 per cent was 5 per cent, down from 8 per cent in 2004.
But once you add on the typical consumer debt nasties of credit cards, store accounts, car loans and friends, things start to get a little shaky when its time to balance the household accounts.
The CML in its review recognises the high and rising level of unsecured debt and concludes that a segment of mortgage borrowers will have a raised sensitivity to changes in interest rates and income levels. But even the CML confesses it is not able to accurately assess the trigger points or estimate the number at risk. A qualified IFA or mortgage broker can accurately assess the risk if they get in front of these clients early enough and complete a full financial review.
Reckoning
The day of reckoning for many mortgage customers may be ever closer and last year the number of properties taken into possession reached 5630, up from 3000 in 2004. This represents just 0.1 per cent of total mortgages, but it is a number that is set to climb, and many consumers could find themselves in above their means. Slower property growth, rising unemployment and spiralling levels of consumer debt could spell disaster for many mortgagees.
Add to this the burden of rate shock as honeymoon deals expire, and slower growth in household incomes and it is clear some serious belt tightening needs to be done fast. The ratio of mortgage payments to household income rose by about 20 per cent between the end of 2003 and the middle of last year.
]]>
So what to do, if your finances are out of control? The problem for many consumers is knowing where to turn. Citizens Advice has been swamped with record levels of enquiries, but realistically what can it reasonably be expected to do? Under-funded and under-resourced no doubt.
Commenting on the repossession figures, Michael Coogan director general of the CML said that now would be a good time for borrowers to review their financial commitments. Cutting unnecessary spending, ensuring they have a suitable mortgage deal and taking out suitable insurance such as mortgage payment protection insurance could make the difference between coping and falling into trouble.
Let us explore that a little deeper. How many consumers pro-actively review their financial commitments? The minority of course. If everybody did, there would be nobody sitting on any bank standard variable rates and the banks would be bleating about horrendous losses. In fact, how many consumers are even privy to CML data?
IMpetus
On top of the gloomy picture on the repossession front there is some significant impetus missing from the mortgage market. There are two key factors at play here. First, pre M-Day outbound calling to generate mortgage enquiries was legal. Post M-Day it was banned. It was banned unilaterally by the FSA, without, dare I say it, any qualitative research undertaken to see what impact banning outbound calling would have on the market particularly with consumers who are not proactive about reviewing their finances. Clearly the major banks lobbied hard to have outbound calling banned, and for good reason.
We estimate that more than a million outbound mortgage lead calls were made in the UK each week before M-Day. Forget the semantics about whether outbound calling should be allowed or not – if you really object you can ring BT and get your number blocked – there is a lot of activity that simply is not happening anymore. There are many consumers out there, who just do not know where to turn until it is too late. Outbound calling certainly was a direct approach, and how many of those calls are not being made to those consumers who desperately need help and do not know where to get it?
I am certainly not talking about the London set or our policymakers at Canary Wharf, I am talking about lower socio-economic and the not so financially astute borrowers, who have been flooded with credit card and loan offers, and lost control of it all. In marketing terms I am talking about C and D grade clients, not As and Bs who get most of the focus. Without help, they will not be clearing credit card and loan offers from their mailbox but repossession orders. No outbound calling means there is a major stimulus missing from the mortgage market. Total lending volumes were significantly down in last year, and some of that must be attributable to that factor alone.
Many IFAs have turned their back on mortgage business. It is difficult to quantify how many, but at the UK Mortgage Summit held in Jerez last year, it was estimated that up to 30 per cent of mortgage brokers and IFAs who completed mortgage business pre M-Day would stop doing so with 18 months of regulation. Doing mortgage business in a heavily regulated environment has all of a sudden become a whole lot harder.
There is quite literally twice the amount of paperwork to complete now, hefty FSA fees to pay and significant fines to pay if you fall foul of the industry watchdog, and yes that is how the FSA refers to itself, as a watchdog. Picture a dobermann, gnashing its teeth and foaming at the mouth. It is enough to put anyone off writing mortgage business, especially if you are a one man IFA outfit who does not want to risk the years of hard work put into building a healthy pipeline of life, pension and insurance business.
Protection
That also leads on to the thorny issue of payment protection insurance. The CML points out there are continuing low levels of consumer awareness about payment risk and the ways it may be managed. There is a real danger that the seemingly endless reviews and commentary about lump sum accident, sickness and unemployment payments versus monthly premium policies will scare more IFAs and mortgage brokers away from the sale of either. It is a difficult one to resolve, but in our experience with sub-prime clients it is easy for them to cancel a direct debit when things get tight, and that is exactly the time they need the payment protection insurance to help them out.
That is a topic for another time, but with repossessions on the rise, it is an issue not to be ignored by the IFA and mortgage broker community. Cover yourself and discuss payment protection with all your clients, make sure it is written down as well, or in the FSA’s eyes it never happened.
The industry needs to heed Michael Coogan’s advice, now is a good time for borrowers to review their financial commitments, but it is IFAs and mortgage brokers that desperately need to be the pro-active ones. Pick up the phone and ring your customers, a call that could save them money and relieve the stress and headaches of finances that are out of control; surely that is not such a bad thing.
There is no doubt that the combined impact of no outbound calling and far fewer IFAs chasing mortgage business means there are fewer options for customers to access a review of their financial commitments, and that could spell disaster. The UK economy is heavily dependent on consumer confidence, and a sharp rise in repossessions would be a significant body blow to that confidence.
Start increasing your traffic today just by submitting articles with us, click here to get started.
Liked this article? Click here to publish it on your website or blog, it’s free and easy!
anonymous -
About the Author:
Matt Davies writes articles on the finance industry for www.blackandwhite.co.uk, who offer secured loans to all kinds of people, even those with bad credit.
]]>
Questions and Answers
Ask our experts your Non-Fiction related questions here…
Ask
200 Characters left
What is the best way to break into the commercial mortgage broker business?
What position the business field offers unlimited earning potential?
What are some potential dangers in grouping worksheets ?
Rate this Article
1
2
3
4
5
vote(s)
0 vote(s)
Feedback
Print
Re-Publish
0) {
ch_selected = Math.floor(Math.random()*ch_queries.length);
if(ch_selected == ch_queries.length) ch_selected–;
ch_query = ch_queries[ch_selected];
}
}catch(e){
ch_query = document.title;
}
]]>
Source: http://www.articlesbase.com/non-fiction-articles/raise-your-guard-or-endure-a-battering-potential-dangers-of-the-mortgage-business-82623.html
Article Tags:
mortgage, loan, finance, ifa, broker, credit
Related Videos
Related Articles
Latest Non-Fiction Articles
More from anonymous
Your Mortgage Decision And Discipline
Jeff Thomas, mortgage advisor, explains the steps you have to go through when buying a house, like if your mortgage decision relates to discipline (01:04)
Your Mortgage Decision And Protection
Jeff Thomas, mortgage advisor, explains the steps you have to go through when buying a house, like if your mortgage decision relates to protection (01:30)
Your Mortgage Decision And Management
Jeff Thomas, mortgage advisor, explains the steps you have to go through when buying a house, like if your mortgage decision relates to management (01:04)
Your Mortgage Decision And Amount
Jeff Thomas, mortgage advisor, explains the steps you have to go through when buying a house, like if your mortgage decision relates to amount (01:22)
Your Mortgage Decision And Availability
Jeff Thomas, mortgage advisor, explains the steps you have to go through when buying a house, like if your mortgage decision relates to availability (00:46)
Seeking Out Mortgage Advice
Whether you are a first-time-buyer purchasing your first home or an existing home owner looking for a remortgage product, it is important to seek out expert mortgage advice to ensure you secure the right home loan for your personal circumstances.
Evolution of the UK Mortgage Market
The UK is often…
By:
michael steriosl
Financel
Dec 01, 2007
Long Term And Short Term Business Property Loans
Commercial property is usually both a major investment for any business to make without having raised some form of debt finance, as well as being a large store of value that a business can use to raise cash from when needed. This article covers the different types of business property loans that are available such as commercial mortgages and bridging loans and how to go about raising a business property loan.
By:
Mark Blayneyl
Businessl
Apr 20, 2010
Secured Loans, Remortgages And Mortgages Are Readily Available
Although the underwriting for secured loans, mortgages and remortgages have changed a lot, these excellent home loan products are still readily available
By:
AVRIL MOIRl
Financel
Feb 12, 2011
Loan Applications: Tougher Times Ahead
The following article will prove useful to anyone wishing to know more about loan applications. It outlines how difficult successfully obtaining a loan has become recently, and covers steps that can be taken to overcome this.
By:
Liam Gl
Financel
Dec 03, 2007
Debt Management Program – boost your income now!
If you are a loans broker, mortgage broker, IFA, lawyer, solicitor, lettings agent, estate agent, claims management company or similar and looking to increase your revenues and maximise your profits then you may want to consider offering debt
By:
Tina Hopel
Finance>
Debt Consolidationl
Jan 24, 2011
Entertainment is everywhere
Thanks to the development of electronic products, we are able to have various enjoyments everywhere. The use of multimedia devices certainly adds much fun to our life that may be boring and stressful without entertainment.
By:
Henry Liml
Writing>
Non-Fictionl
Oct 21, 2011
The audio and video enjoyments on Halloween
Now Halloween is getting closer and closer. If you have no other plans, the audio and video enjoyments can also be a nice and simple choice to spend the holiday time.
By:
Henry Liml
Writing>
Non-Fictionl
Oct 21, 2011
What is the source of your happiness?
The source of happiness is so colorful. It may be from your private life, such as your children, house and hobbies, and it may be from your social life like doing a favor when others need it.
By:
Henry Liml
Writing>
Non-Fictionl
Oct 20, 2011
Citing References in Research Papers
Do you need to give references for the sources of information you are writing about? Here are the basics of citing reference material.
By:
Celia Webbl
Writing>
Non-Fictionl
Oct 19, 2011
Trick-or-treating on Halloween
Today, trick-or-treating is still a popular traditional activity for children on Halloween. It not only brings much fun for the children, but also spread much knowledge of the holiday among people.
By:
Henry Liml
Writing>
Non-Fictionl
Oct 18, 2011
Fishing: Trout Fishing With the Best Fishing Lures
Fishing for trout? Having some difficulties with your fishing game? If so, chances are very high that you’re not using the right fishing lure or bait. Now how can I be so sure?
By:
anonymousl
Hobbiesl
Nov 07, 2008
lViews: 1,173
Can Solar Panels Save You Money?
The popularity of solar panels has increased so rapidly recently that manufacturers are having difficulty keeping up with demand. In this article we look at what exactly are solar panels? How do they work? … and what use might they be to you?
By:
anonymousl
Home and Familyl
Nov 07, 2008
lViews: 1,662
lComments: 2
Busy Families and Time Management
Family life in America today is a juggling act. Many families struggle to find time. The experts provide us with some time honored suggestions.
By:
anonymousl
Home and Family>
Parentingl
Nov 07, 2008
lViews: 412
Youtube in the Classroom
Communication research focusing on a new media technical that has potential use as a supplement to instructor lectures, discussions, and student assignments. Research includes a history of YouTube.com, recent research on the impact ofusing visuals to supplement curriculum, and the results of a survey of community college student use of YouTube.
By:
anonymousl
Education>
College and Universityl
Nov 07, 2008
lViews: 1,843
Weight Loss Problem? Simple Tips to Lose Weight
Fed up of not being able to lose weight? Try these simple weight loss tips
By:
anonymousl
Healthl
Nov 06, 2008
lViews: 401
Add new Comment
Your Name: *
Your Email:
Comment Body: *
Verification code:*
* Required fields
Submit
Your Articles Here
It’s Free and easy
Sign Up Today
Author Navigation
My Home
Publish Article
View/Edit Articles
View/Edit Q&A
Edit your Account
Manage Authors
Statistics Page
Personal RSS Builder
My Home
Edit your Account
Update Profile
View/Edit Q&A
Publish Article
Author Box
anonymous has 743 articles online
Contact Author
Subscribe to RSS
Print article
Send to friend
Re-Publish article
Articles Categories
All Categories
Advertising
Arts & Entertainment
Automotive
Beauty
Business
Careers
Computers
Education
Finance
Food and Beverage
Health
Hobbies
Home and Family
Home Improvement
Internet
Law
Marketing
News and Society
Relationships
Self Improvement
Shopping
Spirituality
Sports and Fitness
Technology
Travel
Writing
Writing
Article Marketing
Book Reviews
Copywriting
EBooks
Ezines and Newsletters
Fiction
Non-Fiction
Poetry
Publishing
Quotes
Satire
Screenplay
Self Publishing
]]>
Need Help?
Contact Us
FAQ
Submit Articles
Editorial Guidelines
Blog
Site Links
Recent Articles
Top Authors
Top Articles
Find Articles
Site Map
Mobile Version
Webmasters
RSS Builder
RSS
Link to Us
Business Info
Advertising
Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2011 Free Articles by ArticlesBase.com, All rights reserved.
