In the report, the Behavioural Insights Team focuses on what could be done to encourage borrowers in financial difficulty to take action earlier, either by seeking advice or by engaging with their lender and the courts service.
As the report says, the past 15 years have been a particularly turbulent time for the Northern Ireland housing market, which has seen a much bigger fall in house prices than elsewhere in the UK. As a result, some households there have suffered significant problems through a combination of negative equity and mortgage arrears.
BIT sought to review the processes currently being followed by the courts, lenders and the advice sector – and the ways in which these organisations communicate with borrowers in difficulty – with a view to improving those aspects of their services that affect borrowers’ behaviour.
The report’s authors make a series of suggestions, some of which are essentially already incorporated in the way lenders operate. Although the report is based on experience in Northern Ireland, some of the suggestions in the report could also be applied elsewhere in the UK.
On communicating with borrowers in difficulty, the report recommends that lenders should review the tone, content and form of letters, and make sure they are concise, written in plain English and include clear action points. The aim should be to encourage borrowers to make contact to try to find a solution – but this is already a key objective for lenders when writing to borrowers in arrears.
The report recommends that all correspondence from courts should carry a brief covering letter, written in plain English. It should also include a ‘road map’ to help borrowers follow and engage with the legal process.
On the process of dealing with a customer in arrears, the report suggests highlighting the prevalence of borrowers finding a solution when they seek advice, and helping them come up with specific plans. Text messages could be used to encourage people to open important letters and remind them to turn up for court hearings. The report also suggests considering the introduction of new financial incentives for prioritising arrears over other financial commitments.
The report proposes raising awareness of debt and mortgage arrears to help overcome “perceived stigma,” and the benefits of identifying key moments in the process of dealing with arrears – so that there is a better understanding of when a borrower is likely to be most sympathetic to messages intended to help.
Finally, in cases in which the borrower is unable to recover their financial position and possession becomes unavoidable, the report suggests exploring a “middle route” by which the borrower may lose ownership of their home but be able to continue to live in it.
