Debt Charities Blame Irresponsible Banks
Debt charities only need to point to the new mortgage products introduced to the UK market last year including interest only mortgages, 100% mortgages, and banks who lent up to 6 times a person’s income, to validate their condemnation with the UK banking industry.
Debt charities blame irresponsible to sub-prime, bad credit, borrowers for leaving homeowners exposed. Chris Tapp, deputy director of Credit Action, the debt counselling service, said: “This problem stems from years of overly liberal lending. When the going was good, everyone lent too freely without thinking ahead.”
Sub-prime mortgages account for less than 10 per cent of the mortgage market, less than one million loans, according to estimates. "Heavy adverse" borrowing is estimated to represent about a quarter of this market. Debt charities do not look at this as a small portion of the UK mortgage market, but as 1 million homeowners who are faced with bankruptcy and repossessions.
"These people should never have been awarded mortgages," one analysts states. “The banks were aware that this demographic would default in a credit crunch.”
The number of people who need help with debt soared to record levels, according to the Citizens Advice Bureau (CAB). The charity reported a 20% jump in requests for advice to 1.7 million over the past 12 months. It now answers 6600 calls a day and has taken on 400 extra advisers to cope with the increased demand.
"There is no let-up in the rising toll of casualties from an unprecedented consumer credit boom and recent sharp increases in the cost of living. Mortgages, council tax and utilities are all more expensive," a CAB spokesman said.
Not all charities blame the banks. Beccy Boden Wilks, of National Debtline, said: "High house prices mean that many borrowers have stretched their budgets to the limit just to get on to the housing ladder. So it doesn't take much to knock them off balance."
It will be these people, with poor credit, and limited resources, who will feel the crunch the hardest.
Published on September 28, 2007
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