Mortgage debt: forbearance `may lead to future problems`

Leniency from mortgage lenders over homeowners` ability to meet their payments is potentially storing up problems for the financial system, according to financial analyst Moody`s. The Telegraph reports.

With many homeowners struggling in recent years, mortgage lenders have been encouraged to find ways of relieving the pressure on struggling homeowners` finances, rather than taking immediate enforcement action. The idea behind this is that homeowners may be able to get back on top of their finances after a while - a better outcome for the borrower and lender alike.

But Elisabeth Rudman, a senior credit officer at Moody`s, said that the measures could cause problems for the financial system in the long run. She said: "There is still high indebtedness on mortgages and there is potential for more borrowers to get into difficulty. As the forbearance numbers are aggregated it is hard to know the scale of the issue for any individual bank, but it is a concern."

An expert at debt management company Gregory Pennington said: "Measures by lenders to help homeowners avoid losing their home have helped a lot of people, but these measures don`t last forever - many homeowners may still have to consider appropriate debt solutions.

"If they act early enough, a solution such as an IVA [Individual Voluntary Arrangement] may be able to help struggling homeowners reduce their unsecured debt repayments and make their mortgage payments affordable again. Or for homeowners who aren`t at the point where insolvency is necessary, a debt management plan might be more appropriate."



Gregory Pennington offer debt advice and debt management plans, as well as a range of other debt solutions. If you are worried about debt, contact one of our expert debt advisers now.