Citizens Advice sees surge in mortgage worries

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by Kay Murchie

The Citizens Advice Bureau has reported a 35% increase in borrowers visiting its offices for help with mortgage arrears.

Figures from Citizens Advice show a 35% rise in mortgage queries in January and February compared with one year ago.

Almost one third of the 5.7 million new problems dealt with by Citizens Advice staff in 2006/07 concerned debt. The borrowers with the most debt were in London and the South-East with Richmond-upon-Thames at the top of the debt league table followed by Putney, Kingston-upon-Thames and Windsor.

Teresa Perchand of the Citizens Advice said it is a worrying trend that the bureau is reporting a very sharp increase in the number of mortgage arrears problems they are dealing with.

She added that the combination of big increases in household bills, especially fuel, and rising housing costs is putting additional pressure on people’s finances when they are already stretched to the limit.

Furthermore, with the ongoing global credit crunch, the number of first-time buyers forced to find 25% deposits has risen to a 30-year high.

Lenders are tightening their lending criteria as a direct consequence of the turmoil in the money markets. Lenders are saving their best deals for the lowest risk borrowers - those who have built up huge amounts of equity in their homes or have substantial deposits to put down.

Nationwide, one of the biggest lenders in the market, has increased its minimum deposit for its best deals from 10% to 25%. Consequently, first-time buyers in London and surrounding areas have seen the deposit they need to find increase from £25,000 to £62,500.

Approximately 1.4 million face an average monthly rise of £200 when their fixed-rate deals expire this year.

The Council of Mortgage Lenders has taken the extraordinary step of suggesting that it may be prudent that some sell their home rather than risk repossession. In many cases they could stay in the same home, paying rent.