Mortgage advice and spending tips from out of the blue? Scary

UK Asset Resolution is cold calling some Bradford & Bingley and Northern Rock mortgage borrowers and offering advice on how to manage their personal finances

According to the Yorkshire Post, they’re telling homeowners to give up Sky; according to today’s Daily Mail, it’s “mobile phones, gym memberships and even socialising” that are getting attention. Either way news that the company managing Bradford & Bingley and Northern Rock’s mortgages is ringing up borrowers to give them spending tips has stirred up controversy.

Richard Banks, the chief executive, of said company, UK Asset Resolution, told the Yorkshire Post that borrowers should be thinking about how they would cope in the future.

“Some people won’t cope when interest rates rise, but for others there are remedies … They need to think about what is their most important debt. It’s not the credit card, or renewing their Sky subscription, or going out, or the latest mobile technology, it’s their mortgage.

“They have been protected by low interest rates, but the consensus is that rates will start to rise late next year.”

You could argue that the move isn’t unreasonable: lenders are under pressure to avoid repossessions, so it makes sense to be proactive. Why not suggest to borrowers that you are worried about their spending habits sooner rather than later? That way they can act before the problems start. At its heart, your mortgage is a business deal, and the lender is protecting its interest. And if you aren’t behind with your repayments, what harm will it do?

But there are aspects to this that are pretty alarming. One is the idea that your lender might be taking a peek at your financial situation whenever it feels like it. OK, so you may have signed something saying it could do follow-up credit checks when you applied for the mortgage, but it would seem only polite that it would let you know. It’s not as if you could cover anything up if it did.

Another cause for concern is the advice it is giving to people it has identified as in danger of falling behind with repayments. Surely it goes beyond cancelling their TV package and to stop going to the gym, but it is unlikely to involve a full look at their income and outgoings and how they can cope with any financial difficulties they do face. To help someone get their finances on track, you need to look at the whole picture. And they need to want your help. Calling them out of the blue and offering guidance may not be the best approach, and could be incredibly stressful for people.

Scarily, on this one I may be as outraged as the Daily Mail. How about you?

Hilary Osborne © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds

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