Lenders 'should expect increase in arrears'

Posted: 22 Oct 2008 11:08:01 GMT

Mortgage providers will see "large increases" in arrears as people struggle to pay back their loans, it has been warned.

According to the Homeowners Advice Centre, which provides guidance to consumers in the property market, many people will fall into arrears as they move onto standard variable rates at the end of their existing deals.

Al Elliot, one of the association's advisers, urged homeowners not to sell or rearrange their lending if it would mean that they fall into negative equity.

He suggested that struggling homeowners forced to move, sell or downsize would be the ones finding it the most difficult to stay afloat.

"Consequently, in the next few months, I suspect a lot of lenders will see large increases of instances of arrears," Mr Elliot concluded.

Research conducted in September for Cheltenham & Gloucester revealed that 32 per cent of people would prefer to pay a higher rate with their existing lender rather than risk being rejected by a different mortgage company.

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