There are ways to avoid repossession when money gets tight, says Edel Morgan
Homeowners who find themselves struggling to meet mortgage repayments can act like "rabbits in the headlights", says Michael Culloty of the Money Advice and Budgeting Service (MABS). He says the head-in-the-sand approach is not uncommon in these situations and can have disastrous consequences.
Higher interest rates and a less buoyant economy have seen some people pushed to the limit with mortgage repayments and a change in their circumstances can see them falling off the merry go-round. Last year house repossessions by lenders rose 50 per cent and, according to Culloty, people who don't own up to their lender about their predicament can find themselves in difficulty very quickly. Some banks are more sympathetic than others. Sub prime lenders - which have less stringent criteria for granting loan approval - appear to be less accommodating than some of the main lenders when it comes to giving struggling customers leeway "and will take people with small arrears to the high court". Even the mainstream banks are becoming less willing to grant people lengthy moratoriums.
John McCafferty, head of social justice at St Vincent de Paul, says the number of mortgage-holders seeking financial help from the charity is increasing and while it's not exactly widespread "it's a quiet phenomenon that is gaining momentum". The charity can offer basic financial advice, often referring people on to MABS, and short-term financial succour to tide people over and help them buy food or pay urgent bills.
John Monaghan, national vice president of St Vincent de Paul, says that the level of indebtedness in this country "scares" him because it leaves people particularly vulnerable if their situation changes. Those who have been particularly affected so far are semi-skilled and low-skilled workers whose jobs have been outsourced; self-employed people or sub-contractors who have been laid off or are out of work through accident or illness; and people living in rural areas where factories or businesses have closed. Another significant group are divorced or separated people who are left with a home and who are struggling to meet repayments.
"It's still not as big an issue as it was in late 1980s and early 1990s," says Monaghan, "but the level of indebtedness is now far greater, which leaves less room to manoeuvre when things go wrong. Back then interest rates were as high as 14 and 15 per cent but the amounts of money involved were far smaller." He believes there has been an element of irresponsibility on the part of the lenders who are giving credit cards and loans to people of limited means.
But doesn't personal responsibility come into it anywhere? "Yes, for people with pretty good jobs with a lot of money coming in who are living beyond their limit. At the other end of the scale are people who don't have enough to live on. They might be in low paid employment and struggling and then the washing machine breaks down or they need to take the children to the doctor and they use the credit card or take out the loan to make ends meet."
Michael Culloty believes the old fashioned telly-on-the-cardboard-box approach shouldn't be dismissed by new homeowners. "Often people feel that they have to have the furniture and the carpet straight away and they take out various lifestyle loans." Sadly MABs often doesn't see people until they are practically on the courthouse steps. "There is little we can do at that juncture. The advice is to come to us early on when things are getting tight. Think long and hard before borrowing your way out of difficulty or using credit cards to do it and, while consolidation loans may be suitable for some, you need to consider the cost long term. The MABs helpline is: 1890 283 438
