Repossession, repossession, repossession may well be the title of the next big property TV show. The Council of Mortgage Lenders (CML) said that 11,300 homes were repossessed in the third quarter, up 12% on quarter two. Worse, the CML forecasts a total of 75,000 in 2009, a 67% rise on 2008 and close to the last peak in 1991. And even selling up to avoid repossession is tough. The Royal Institution of Chartered Surveyors has revealed that estate agents are averaging less than one sale a week. So how can you avoid repossession?
For starters, says The Daily Telegraph’s Richard Evans, forget handing the keys back to your lender and walking away. You will still be liable for any outstanding mortgage, plus interest, until the property is sold. If you are in work, negotiate with your bank or building society as soon as possible. Options include switching from a repayment mortgage to interest only, taking a temporary mortgage holiday, and even increasing the original mortgage term. But bear in mind that this is all at the discretion of the lender.
Also review your household budget, cut back on non-essentials and prioritise paying your mortgage along with household bills. If you have an ‘income protection’ policy, to cover all or part of your mortgage costs should you lose your job, the first months of unemployment are often excluded, so check the terms carefully.
But what if you’re made redundant with no insurance or rainy day cash? Repossession is still not inevitable. The Government offers a scheme designed to pay some of your mortgage interest. Claiming is fairly complicated, so talk to the Citizens Advice Bureau (Citizensadvice.org.uk). The scheme was recently extended from 1 January to pay interest direct to your lender on up to the first £200,000 of a mortgage, at a capped rate of 6.08%.
Then there’s the newly announced Homeowner Mortgage Support Scheme. The aim is to allow households that suffer a “significant and temporary loss of income” the chance to defer mortgage interest for up to two years on loans of up to £400,000. But the details are hazy and housing minister Margaret Beckett has suggested that only around 9,000 people may benefit. A £200m scheme to allow an “eligible home owner” to sell all or part of a home to a housing association and remain in situ as a tenant also starts this month. Again, this seems destined to assist relatively few homeowners.
The final glimmer of hope is that full repossession takes time. Royal Bank of Scotland says it will wait six months after arrears start to begin legal proceedings, a period other lenders may abide by. Even then, “it is taking between 160 and 185 days” to repossess homes, says HSBC. That, at least, buys you time to negotiate with your lender, or even achieve a sale.