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UK Mortgage Direct Debit Caution

by Jim ONeil on May 26, 2011

in Mortgages

Financial Web site Moneybasics.co.uk recently found that one in every 20 UK homeowners does not use direct debit to pay the mortgage. This places these five percent of mortgage holders at risk of missing payments, which could lead to big financial woes.

The majority of people without direct debit have already fessed up to recently missing at least one mortgage repayment.

According to the survey, five percent of UK homeowners use check, cash, or debit card to pay their mortgage each month. The survey also found that homeowners without direct debit represented close to two-thirds of the eleven percent who missed a payment during the past three years.

Fifteen percent of people in this group admitted to forgetting to pay the mortgage.

Missing payments results in penalization fees and can negatively impact the credit rating. For up to six years, it could even affect the ability of the mortgage holder to borrow money. Despite this, 65 percent of those surveyed said that they would rather be in control of their bill payment or feared they would not have a high enough bank account balance come direct debit day.

Some respondents cited their preference for debit cards, checks, or cash for making payments, while others said they did not trust the direct debit method of payment. Some people believe a fee will be

imposed if a direct debit payment is missed.

Experts report that direct debit can assist with budgeting and ensure that a mortgage payment is not missed.

The average UK homeowner will face a constrained household budget throughout this year. Mortgage loans are usually the largest monthly expense for a household. It is smart to have direct debit set up for loan repayment, illustrating good financial management.

Direct debit prevents mortgage payments from being missed but only the homeowner can ensure there is enough money in the bank account.

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Contact the FSA to find out what is legal and what is required.

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