What to do if you can’t pay your mortgage or loan, as number of people struggling rises 40%
Number of people struggling to pay off mortgage or loan payments by 40%: here’s what to do if you’re at risk of falling into troubled debt
- There is a big increase in repayment problems and people are missing deadlines
- Now the FCA regulator has told financial firms to help those who are struggling
- Consider, for example, extending the term of the loan or even reducing the debt
The number of people struggling to repay loans has risen by 40 percent, and now the financial watchdog is urging them to seek help from their lender.
There are now 10.9 million people experiencing mortgage and loan repayment problems, up from 7.8 million a year ago, according to the Financial Conduct Authority.
The share of missed payments increased by 33 percent in that period, from 4.2 million to 5.6 million.
Britons are having more difficulty repaying loans due to the rising cost of living, which is the source of a second source of financial pain: increases in the Bank of England’s base rate.
Speak up: Consumers who have run into payment problems are asked to address their lender
The British central bank has been steadily raising its key interest rate, now at 4.5 percent, to try to curb skyrocketing inflation.
But as base rates rose, so did mortgage and redemption costs.
Car repayment costs hit an all-time high in 2022 and home foreclosures more than doubled in the last quarter of last year.
What to do if you have problems repaying your loan
Those struggling with repayments should contact their lender or the company they owe money to in the first instance, the FCA said.
What help can my lender offer me?
Financial firms have been told by the regulator to provide support to customers struggling with payments.
What that support looks like will depend on individual companies, as the FCA has only issued a broad mandate for companies to comply with.
This is because being too prescriptive could mean some Britons aren’t getting the help they need, so the FCA wants to give companies an idea of what it wants and let them fill in the gaps.
But the regulator has said it expects companies to provide customers with “an appropriate level of care and support,” and to provide more care if that person is vulnerable.
The FCA suggested that lenders could extend customers’ repayment terms or come up with a new repayment plan if they run into trouble, or even reduce or freeze their payments.
The regulator also told financial firms that any fees they charge for delayed or underpaid payments must be fair, and warned them against profiteering.
Sheldon Mills, executive director of consumer and competition at FCA, said, “If you’re worried about your finances, don’t worry alone. We’ve told lenders to provide support tailored to your needs. And if you’re in debt or want to learn more about how to manage your finances, free expert advice is available.
“We will continue to act quickly to ensure that financial firms help their clients who are in financial distress or fear that this will soon be the case.”
What to do if you are in debt
Many experts recommend that people with repayment problems first calculate their monthly income and expenses.
The next step is to figure out where savings can be made, or if the person can somehow bring in more money.
After that, the remaining steps are to prioritize paying back debts with the highest interest payments and then seek help.
These organizations and websites may be able to help if you have problem debt: