Banks and lenders to reduce reckless borrowing Article

By: Jama Dowers

Banks and mortgage lenders are to be forced into becoming more responsible for assessing a borrower's ability to repay a loan under new plans being proposed by the FSA. Sub-prime mortgages drove us into a global recession, so this move has been widely welcomed.

According to Credit Action, consumer debt is increasing and people continue to fall into arrears on their mortgage repayments, so much so that a property is now repossessed every 11.5 minutes in the UK. The Government's aim under this new plan, is to abolish 100% or even 125% mortgages which banks had knowingly been giving to consumers they knew might fall into areas.

The downsides are that the property ladder will become even more inaccessible, particularly to first time buyers as deposits will have to be significantly bigger and the amount money loaned will be reduced. However, in the long run this system will actually reduce the amount of repossessions and unaffordable mortgages.

If you fall into debt and are in arrears on your mortgage repayments, what should you do? To start with, your bank should be your first port of call. How flexible and agreeable they are will depend on the type of mortgage you have, how much you owe and whether you have a regular bank account with them. Many mortgages let you pay off more or less each month as long as after a specific time period you have paid off an agreed amount.

Remember that a mortgage is secured against the value of your property, so if you fall into arrears you risk losing your home. Therefore, it is more important to budget and pay off your mortgage than any other debt.

If you really get into trouble then you may need to speak to specific debt advisory groups. Since the recession more charities and agencies are offering their services of debt consolidation and can help create debt management plans so you can pay off the greatest debts with the highest interest first, allowing you to better manage your finances and pay everything off over a longer term.

You could also investigate the Homeowner's Mortgage Support scheme backed by the Government. This allows you to put off paying some of your monthly mortgage payments for up to two years. You will still have to pay the money back including interest but it could give you a much needed break to get back on top of all of your other finances and debts.

Last and definitely the final choice is to declare yourself bankrupt. One person is declared bankrupt every 3.97 minutes in the UK, but before you even thing about going down this route you should seek as much advice as possible. Remember that this is a last resort and not an easy way out.

Article Source: http://articles-book.com

Jama Dowers has recently been looking into debt consolidation offered by Baines and Ernst and is now using their debt management service.

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