The number of lenders trying to secure loans and credit card debts against borrower’s properties has increased dramatically according to provisional Ministry of Justice figures.
Their findings show that the number of banks seeking court orders to secure personal debt against property has risen by 42 per cent year on year, reaching 131,644 in 2007.
This figure rises to almost 100 per cent when taken between 2005 and 2007.
Charging orders are effectively an additional mortgage on a home, giving creditors security for their money if they find their customers are having trouble repaying loans.
KPMG’s Mark Sands says: “It’s a drastic increase. 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.
“Lenders are looking at all options to get their money back”.
Chiltern’s Nathan Gladwell says: “This trend further indicates the pressures that financially overstretched consumers face.
“Lenders are looking for greater security that they will get their money back from debtors, and charging orders guarantee that they’ll be able to recoup their money at some point in the future.
“These charges don’t require debtors to sell their homes immediately, and repossessions as a result of charging orders are rare.
“However, it’s always best to avoid these charging orders where possible and deal with unsecured debts immediately, and informal arrangements – like debt management – usually offers a win-win outcome for both parties.”
Whilst provisional, the Ministry of Justice says that the data is “unlikely to change”.
