Education is the key
Homeowner mortgages in arrears have risen by 7% amid higher interest rates, according to UK Finance.
So, what support is needed for those affected and how can brokers support clients facing these challenges?
What support is needed for those facing arrears?
Kundan Bhaduri (pictured left), property developer and portfolio landlord at The Kushman Group, said tailoring a personalised strategy for each client is not just a prudent approach, it is a necessity.
“Conventional solutions like customised repayment plans, term extensions, and adjusted interest rates are valuable, but a holistic evaluation of the family’s financial landscape takes centre stage, going beyond the standard repertoire,” he said.
In the arsenal of strategies, Bhaduri said, government-backed schemes play a vital role, offering temporary relief to struggling homeowners.
“However, a nuanced approach extends beyond these measures; targeted initiatives, such as bolstered financial counselling services and widespread public advertisements, become integral components of a comprehensive support system,” Bhaduri said
Drawing from the lessons of the recent past, temporary interest holidays, akin to those implemented during the COVID period, Bhaduri believes, should be revisited.
“However, a cautious perspective is warranted, mindful of the potential strain on the treasury; striking a balance between support and fiscal responsibility becomes paramount, emphasising sustainable solutions over immediate gratification,” he said.
Simultaneously, a forward-looking strategy, Bhaduri said, involves fostering a culture of financial education.
This, he believes, extends beyond individual households to institutional levels, equipping new homeowners with the knowledge and resilience needed to navigate the complexities of economic uncertainty.
“Overall, the synergy of tailored approaches, government initiatives, and a commitment to financial literacy, forms a robust foundation for supporting homeowners during these challenging economic times,” Bhaduri said.
How to support clients facing arrears?
Gary Bush (pictured right), financial adviser at Mortgage Shop, said the duty of financial advisers extends to supporting clients navigating challenges in meeting their mortgage payments.
“For suitably qualified advisers equipped with Financial Conduct Authority (FCA) permissions, a proactive approach involves negotiating with the clients’ financial institutions,” he said.
Bush added that starting this process early is pivotal, and highlighted the importance of effective and proportionate prioritisation of bill payments.
“The recent jolt in interest rates experienced in the UK was not an unforeseen event; it has been on the horizon for almost a decade,” he added. The persistently low bank base rate, while intended to stimulate economic activity, he said, has posed challenges in controlling inflation. In addressing the aftermath of this interest rate shock, he believes it is crucial for the UK government to recognise that billpayers are encountering difficulties in meeting newly inflated mortgage payments.
“Consequently, there is a pressing need to amplify their public information programs; the focus should be on educating homeowners,” he said.
This strategic shift, Bush said, can serve as a buffer, providing homeowners with a brief respite from the immediate impact of a rate shock.
By fostering a better understanding of financial strategies and emphasising proactive measures, he said, the government can empower homeowners to navigate these challenging economic times more effectively.
“It is not just about weathering the storm; it is about providing the tools and knowledge for homeowners to build financial resilience in the face of uncertainty,” Bush said.
How do you believe clients facing arrears can be supported? Let us know in the comment section below.
