Significant increase in Mortgage Debt

On Monday 8 August 2011, the Minister for Finance Sammy Wilson, held a meeting with business representatives and the trade unions to discuss the impact of the further economic instability on Northern Ireland.

Following on from this, Citizens Advice is highlighting the significant increase in mortgage debt over the past five years. Mortgage debt has risen steeply since 2006/7 when it was £475k and it has risen very sharply in the past year in particular. In consequence, in agreement with DETI, we have divided mortgage debt into 3 categories for the purpose of recording from April 2011.

Mortgage Debt is the whole sum, arrears and shortfall prior to a voluntary surrender or repossession action.

Mortgage Arrears is arrears on Mortgage repayments.

Mortgage Shortfall is when the house has been sold in negative equity and client is liable for the balance/ shortfall on Mortgage fund, eg. endowment schemes.

As you will see from the figures below, mortgage debt has experienced a particularly dramatic rise since the beginning of the global economic crisis in 2008 and this trend shows no signs of abating over the coming months and years.

On the basis of our caseload, we believe that mortgage shortfall has contributed significantly to the rise in overall mortgage debt in the past year, with many lenders now pursuing people for the difference between the outstanding mortgage and the proceeds of an enforced sale.  The five year trend which the figures illustrate, mean that any rise in Bank of England interest rates will throw many people in Northern Ireland into significant difficulties with their housing.

Citizens Advice believes therefore that in any discussions with the banks it would be helpful if Ministers emphasised in future discussions with lenders, the need to be as supportive as possible to people who find themselves in difficulties by extending the period of loans and by exploring as far as possible, all of the alternatives to repossession.