The Northern Ireland Department for Social Development has recently published a report conducted by the Behavioural Insights Team looking into ways of encouraging borrowers facing mortgage arrears to take action earlier, either by seeking advice, engaging with their mortgage lender or attending their court hearing.

The analysis focussed on data and research in Northern Ireland, home to a turbulent housing market which has resulted in many households facing negative equity, arrears and repossessions.  The findings are, however, likely to be applicable across the whole of the UK.

The main suggestions include:

  • Correspondence from lenders should avoid sounding aggressive or pessimistic, instead encouraging borrowers to make contact to find a solution.
  • The first point of contact between borrowers and banks is critical in setting the ongoing relationship.  Too many customers, when proactively phoning their lenders before entering arrears, are not offered a pre-emptive solution.  Banks should introduce processes to help customers during pre or early arrears.
  • Consider introducing new financial incentives for prioritising mortgage arrears over other expenses.
  • Consider changing the policy landscape to offer a ‘middle route’ in which borrowers can stay in their home but relinquish ownership.

The report can be read in full here.