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More Court Orders Securing Debt against Properties
Figures from the Ministry of Justice have indicated a sharp rise in the number of lenders seeking to use borrowers’ properties as collateral against loans and credit card debt.
The figures show that in 2007, some 131,644 banks sought court orders securing customers’ debts against property.
This represents a 42 per cent increase since 2006, although the increase is closer to 100 per cent since 2005.
The government stressed that the figures were only provisional, but added that the data was "unlikely to change”.
Accountancy firm KPMG’s director of personal insolvency, Mark Sands, called the rise “a drastic increase” and warned that it showed the pressures bearing down on borrowers with high levels of debt.
"You take on an unsecured loan or credit card, you fall into arrears, the bank decides to take you to court, and if you still don't pay you end up with a charge imposed on your house by the court,” he said.
"Lenders are looking at all options to get their money back.”
Such court orders - known as charging orders - effectively impose a second mortgage on a property to the benefit of the lender, which gains security for its loan in the event of a borrower experiencing difficulty making repayments.
The use of a charging order does not mean the holder of a mortgage has to sell their home. Lenders have to wait for the property to be sold at some point before they definitely get repaid.
Loan News posted on 02 May 2008
