Repossessions due to "stretching" finances too far
08 November 2007
Financial difficulties related to mortgages are often triggered by borrowers "stretching themselves too far", one mortgage broker has warned.
Unsuitable mortgage products primarily come about when borrowers either accidentally or fraudulently take on too much than they can realistically afford, Alexander Hall said.
Andy Pratt, chief operating officer for Alexander Hall, said: "[Sometimes] it's a genuine mistake where they stretch themselves too far; a good mortgage broker should alert them to that by assessing their income and outgoings."
He added that decisions in principle (Dips) - estimations by the mortgage provider as to how much they would be willing to lend based on the client's financial situation - are beneficial as they give borrowers more information without being a binding agreement.
"It puts the buyer in an informed position where they then can go on their property search knowing what they can afford," Mr Hall explained.
According to the Council of Mortgage Lenders (CML), 14,000 properties were taken into possession in the first half of 2007, up from 10,800 at the same time in 2006.
Around 0.12 per cent of total mortgaged properties were taken into repossession in the first six-months of the year, latest CML figures show.
