/ Money

Mortgage lenders giving debt advice – why not?

Man on phone with credit card

Thousands of existing Northern Rock and Bradford & Bingley mortgage customers are being contacted to make sure they’re coping financially. Sounds like a responsible approach to me. So why the furore?

More than 30,000 people who took out Northern Rock and Bradford & Bingley mortgages will be getting a phone call from the taxpayer-owned lender (now known as UK Asset Resolution or UKAR) over the next few months.

As part of this process, UKAR has been running credit checks on its existing customers, leading some media outlets to get their collective knickers in a twist. I don’t see why.

Advice when it’s needed

Mortgages are usually taken out for long periods, and circumstances change over time. If I’d lent someone £100,000 and I knew times were hard, I’d want to know they could afford to repay me. Armed with the facts, I’d be able to offer them help at a stage when their debts were still manageable.

UKAR says that around 10% of its customers are having difficulties repaying their mortgages – if they’re given a chance to help these struggling customers early, it can only be a good thing.

OK, Northern Rock itself isn’t free of blame. Back in the day many of those contacted were probably offered mortgages at over 100% the value of their property – one of the reasons Northern Rock ultimately failed. But to have a pop at lenders for offering early advice and support is misguided.

Are they doing the right thing?

If you’re struggling with your mortgage, your first contact should be with your lender. Unfortunately, far too many people only speak to their bank when it’s too late. By proactively contacting the customers that it thinks may be vulnerable to future rises in interest rates and household bills, UKAR is doing the right thing.

Of course, it has a vested interest in telling people to prioritise their mortgage repayments over their mobile phone, but that doesn’t make the core message wrong.

Have you been contacted by UKAR about your Northern Rock or Bradford & Bingley mortgage? Would you welcome the banks’ interest in your finances, or would you tell them to mind their own business?

Comments
Profile photo of frugal ways
Member

I’d tell them to mind their own business.
Credit checks appear on credit records, which could push up interest charges for future applications in other areas.

Burt bloggs has a northern rock mortgage – 5 years in to paying it back, with no missed payments – Burt has his credit file checked by northern rock and receives a call about how he is managing his money.
A week later, Burt’s car conks out and needs replacing, so Burt applies for car credit for a used car, they run a credit check on him and see that northern rock has also just done a credit check on him, instead of paying 10% interest, the underwriters now decide he is a bit more of a risk and charge him 15% interest.

A bank has no right checking anyone’s credit rating unless they make an application – whats next? insurance companies checking NHS records?

Member

I don’t see what right a bank has to tell me how to spend my money. As long as I keep up the payments on my loans that should be the end of it as far as they’re concerned. It’s a further intrusion of the nanny state mentality which is robbing us of our individual freedom.