EU clause could lead to repossessions rise

Tue, 24 Jan 2012

A rise in repossessions could be on the cards thanks to an obscure European Union (EU) directive currently being pushed through by the European Parliament.

As part of the proposals, lenders who see borrowers falling behind on payments will have to begin repossession proceedings after three months rather than the usual six.

This increased risk of default could result in the costs faced by banks to lend jumping by 15 to 20 per cent - and it is likely to be homeowners who suffer as less mortgages are made available.

Michael Atkinson, director of the mortgage brokers Summit Capital Mortgages - which provides home loan advice to those living in London and the south-east of England - explained the amount of slack companies can give to borrowers would be reduced by half should the European directive become law.

The industry figure noted: "At a stroke, it would pull the rug from under many thousands of Britons who are currently struggling to keep up with their mortgage repayments."

He added this would increase costs for lenders, who would put up interest rates and tighten their lending criteria to make up for the losses.

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