One of the many unfortunate side-effects of the trying economic conditions prevalent at the moment is the number of borrowers struggling to keep up their mortgage repayments.

As redundancies and pay freezes bite and the cost of living edges up, some individuals find it increasingly difficult to service their home loan and fall into arrears.

However, despite the seemingly interminable recession, a number of lenders – ourselves included – have been working hard with borrowers to ensure that our arrears figures remain minimal and we have been able to continue reducing our levels quarter by quarter to the extent that we recorded a four-year low in July.

Lenders sometimes unfairly get a bad reputation when it comes to forbearance policies, but it is always worth noting that we have as much interest in keeping the borrower/homeowner/tenants in place as the individuals themselves want to stay put.

It is in the interest of both parties not to upset this status quo and, to this end, we always do everything in our power to engineer mutually beneficial solutions.

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As part of our overall arrears management programme, we embarked on a project earlier this year to not only help potentially vulnerable borrowers, but also to identify those who may be susceptible to rate increases or a further deterioration of the economic climate.

After all, as with many financial quandaries, it is always better to nip problems in the bud as soon as they arise if they can’t be prevented altogether.

One of the main reference points for the scheme was the Financial Services Authority’s Forbearance and Impairment Provisions, but the project was also steered by our arrears team’s expertise and experience.

The initial stage involved analysing various customer segments with the intention of identifying vulnerable cohorts based on current and historic delinquency.

While there was a certain degree of overlap between the 10 groups we eventually decided upon, we decided to flag customers as potentially susceptible to payment difficulties if they qualified for three or more cohorts.

Some examples of these groups included customers on interest-only mortgages, those living in areas of high unemployment and individuals with a delinquent credit line (not necessarily with CHL).

While the initiative is still in its relative infancy, early indications suggest that it has been highly effective in identifying borrowers who can slip into difficulty.

In fact, four months after earmarking customers as vulnerable, default levels in the susceptible cohorts are 16 times higher than the control group consisting of non-susceptible individuals.

The initial promise of this scheme is testament to the proactivity we display in dealing with borrowers who may be falling into difficulty, but it is important to remember that successfully steering vulnerable individuals away from danger is very much a two-way process.

The earlier borrowers can notify their lender that they may be on the verge of encountering problems, the easier it is to establish a temporary fix.

After all, as the old adage says, prevention is better than cure and lenders are well versed in methods of assisting those in trouble.

As well as becoming more adept at dealing with borrowers in difficulty, another reason why arrears levels remain under control across the board is the more sensible approach to lending that has been adopted by banks/lenders over the past few years.

Borrowers may bemoan the fact that mortgages aren’t as easy to come by as they previously were, but there is no better way to avoid repayment problems than by not issuing home loans to unsuitable customers in the first place.

This isn’t to permanently exclude any individuals from the housing/buy-to-let market, but more to recognise that there are steps individuals can take to repair their credit history or enhance their circumstances before they represent a suitable borrower again.