Mortgage repossessions could soar if Europe gets its way

Posted in 'Mortgages' by Richard Catlin

01 February 2012

UK homeowners are facing the double threat of higher mortgage costs and an increased risk of having their home repossessed should a new EU directive become law.

The draft directive is proposing that all loans within the European Union be treated as being “in default” after only 90 days, rather than the current 180 days that is in place in the UK. The move is aimed at making banks more secure and limiting the damage that increased default rates could do to an already fragile European economy.

European legislation isn’t the only challenge facing UK homeowners. The Council of Mortgage Lenders (CML) issued a warning at the end of 2011 that it expects repossessions to increase in the coming months, driven mainly by increased unemployment. It has forecast that repossessions will increase from the fairly stable current level of 37,000 a year to 45,000 in 2012.

The cost of any extra defaults won't be absorbed by lenders - they will simply be passed on to borrowers in the form of higher interest rates. Lenders may also be forced to tighten their acceptance criteria, reducing the number of loans they issue.

Regardless of any changes, your credit rating remains one of the key elements in any mortgage application. Failure to get listed on the credit reference agency version of the electoral roll, erroneous late payments or financial associations that are no longer valid could all scupper an application at the first hurdle.

You can check to make sure everything is as it should be on your credit file with our Multi Agency Credit Report. It’s completely free for 30 days, and then just £9.99 a month should you choose to carry on subscribing. Reports contain more than twice the data you can get anywhere else, and your credit scores are included free too.

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