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If a homeowner fails to keep up their mortgage payments, the mortgage lender may seek possession of the property through the courts in order to sell it and repay the loan. In recent years the number of mortgaged properties taken into possession in the UK has been historically low, with the majority of borrowers paying their mortgages on time and in full. The fall in the number of properties repossessed since 2009 coincides with lower interest rates, a proactive approach from lenders in managing borrowers in financial difficulties and other interventions, such as the introduction of a Mortgage Pre-Action Protocol.

Coronavirus (Covid-19): mortgage support measures

During the coronavirus (Covid-19) pandemic, the Government, Financial Conduct Authority (FCA) and mortgage lenders put in place temporary measures to assist homeowners in managing their mortgage repayments and avoiding repossession action, including:

  • From March 2020 to 31 March 2021, mortgage lenders offered payment deferrals of up to six months to homeowners experiencing issues with their finances due to Covid-19. In total, lenders granted nearly 3 million Covid-19 mortgage payment deferrals.
  • A moratorium on possession proceedings against homeowners was in place from March 2020 to 1 April 2021.
  • The Government provided £102 million for consumer debt advice in 2020/21 and £94.6 million in 2021/22.
  • Whilst the Covid-19 mortgage payment deferral scheme has now ended, lenders must continue to provide tailored forbearance and support to borrowers facing ongoing financial difficulties.

There is evidence that these interventions, together with income support measures such as the Coronavirus Job Retention Scheme, have helped to mitigate the impact of the Covid-19 outbreak on households with mortgages.

At the end of September 2021, the proportion of mortgages in arrears of 2.5% or more of the total outstanding balance remained similar to the level seen before the pandemic. Repossession activity was minimal while the moratorium was in place but started to rise again after April 2021. Numbers of repossessions currently remain below pre-pandemic levels.

Lenders’ obligations

Mortgage lenders are required to follow certain steps when a homeowner falls into arrears. Before they seek possession of the property lenders must demonstrate that they have done everything they are required to do under the FCA’s Mortgage Conduct of Business (MCOB13) rules to make possession a matter of last resort. Mortgage lenders must also adhere to the Mortgage Pre-Action Protocol which sets out clear standards expected when lenders bring repossession cases to court.

The FCA has been working with the industry to help it improve and strengthen arrears management practices.

Assistance for households

Advisory bodies tell anyone with concerns about managing their mortgage to contact their lender as soon as possible to discuss the options available. There are several charities and organisations providing free, independent debt advice.

The Government’s Support for Mortgage Interest (SMI) scheme provides financial assistance in the form of an interest-bearing loan for claimants of certain means-tested benefits. Commentators have called on the Government to strengthen the financial support available through the scheme.

Some mortgage lenders offer Assisted Voluntary Sale support to homeowners with mortgage arrears to enable them to sell their home and avoid repossession.

Low-income households facing possession proceedings may be entitled to free legal aid.

Historic schemes to support homeowners

Additional, temporary, measures were introduced as a direct response to the 2008 financial crisis in order to support homeowners struggling with their mortgage payments and to minimise the number of repossessions. These measures included:

  • A Preventing Repossessions Fund – to enable local authorities to offer small loans to mortgagors at risk of repossession.
  • A Mortgage Rescue Scheme – which was administered by local authorities and typically involved a housing association purchasing the house, or a portion of it, and then renting it back to the original owner, who could continue to live there as a tenant.
  • A Homeowner Mortgage Support scheme – which enabled eligible homeowners to defer a portion of the monthly interest payments on their mortgage for up to two years.
  • Changes to the Support for Mortgage Interest (SMI) scheme to strengthen support for those affected by the economic downturn, including reducing the waiting period for SMI to 13 weeks and increasing the mortgage cap to £200,000 for new working age claimants.

Increased lender forbearance, together with the various Government schemes to support householders, enabled many homeowners to avoid repossession and stay in their homes.

Sale and rent back schemes

The private sector also developed its own mortgage rescue response in the form of “sale and rent back” schemes. These schemes involve private companies buying people’s houses at discounted prices and keeping the ex-owners in situ as tenants.

Although these schemes provide individuals with a quick and easy source of cash, they were, until 2010, unregulated and could leave ex-owners facing substantial rent charges or, ultimately, eviction, as they have no long-term security of tenure as assured shorthold tenants.


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