New measures announced to protect homeowners from repossessions

Homeowners facing soaring mortgage costs will be protected from repossessions for 12 months in an agreement reached this afternoon between the government and leading mortgage providers.

The meeting between Chancellor Jeremy Hunt and leaders from some of the country’s largest banks and building societies (including Lloyds, NatWest, Barclays and Virgin Money), followed yesterday’s interest rate rise to 5%.

The result will see the budgets of millions of UK households squeezed further.

They agreed to a 12-month delay before taking repossession proceedings against borrowers who are unable or unwilling to pay.

It was also agreed that borrowers will be able to make a temporary change to their mortgage terms, then be able to return to their original deal within six months, without affecting their credit score.

This will allow homeowners to reduce their payments for a short period by switching to interest-only repayments.

However, it may still affect your credit score if you miss a payment or choose to take a mortgage holiday, potentially making it harder to borrow in the future.

While not a direct intervention, the aim of the agreement is to kick-start a campaign to make people who are struggling aware of their options.

The meeting provided no comfort to people who rent their homes, with industry bodies concerned that interest rates of 5% will force landlords to either sell their properties or hike rents.

Mr Hunt said: “There are two groups of people that we’re particularly worried about.

“The first are people who are at real risk of losing their homes because they fall behind in their mortgage payments.

“And the second are people who are having to change their mortgages because their fixed rate comes to an end, and they’re worried about the impact on their family finances higher mortgage rates have.”

What happens if you miss a mortgage repayment?

If you miss two or more monthly mortgage repayments, you’re officially in arrears.

It’s crucial that you contact your lender if you’re struggling – the earlier the better. Don’t bury your head in the sand.

Mortgage lenders are used to advising people who can’t afford repayments and have trained staff on hand to help.

Could I lose my home?

You may decide to sell your home if you can’t afford to make the repayments owed. In extreme circumstances, your lender could take court action to repossess it.

Repossessions are far rarer than they used to be. Under the new agreement, your lender will have to give you 12 months before it begins a repossession procedure against you.

There are lots of steps a lender needs to take before repossession. The whole process usually takes around two years.

If you’re struggling with your mortgage payments, get in touch with us for free independent debt help.