Repossession and how to avoid it Repossession worries - first steps

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Failing to pay your mortgage could cost you your house

If you fail to meet your mortgage payments, the lender's ultimate sanction is to repossess your house. However, it should be the last resort after they have explored other options with you.

Court guidelines announced by the government in autumn 2008 were designed to make repossession even more of a last resort but it is still a risk if you fall into arrears.

By taking early action and communicating effectively with your lender, you should be able to reach a settlement before things go this far and greatly reduce the risk of losing your home.

Mortgage problems that could lead to repossession

Traumatic life changes can often cause people to struggle with mortgage payments. Losing your job or your business failing is the most common reason why people fall into mortgage arrears, according to research by Citizens Advice.

A monthly payment that was previously manageable suddenly becomes unaffordable if your income is abruptly reduced. Other common causes are divorce and bereavement.

Another trigger is the end of a mortgage deal, such as a fixed rate. Borrowers coming to the end of a cheap deal can find themselves faced with a sudden leap of as much as 2% as they move from their old rate to the lender’s standard variable rate (SVR). This is less of a problem now, however, as SVRs have reduced due to the dramatic cuts in the Bank of England's base rate.

At a time of rising costs, this can be the final straw that makes a mortgage unaffordable, even to those whose finances are otherwise quite sound.

You might be able to save money by remortgaging at this point. Visit the Which? mortgage deal finder to check.

Dealing with your mortgage lender

Here are some of the key things to bear in mind when dealing with your lender.

  • Be clear and straightforward
  • Don't ignore your mortgage lender's letters and enquiries
  • Remember that it is in your lender's interests as well as yours to reach a negotiated settlement
  • Write to your lender and provide financial details to reduce the likelihood of repossession. If the lender is unwilling to agree to your proposed repayment plan, it might still bring repossession proceedings but you will be in a much stronger position when the case comes to court.

Free debt advice

You can get free advice from Citizens Advice, the Consumer Credit Counselling Service (CCCS), National Debtline and Shelter England or Shelter Scotland.

Advisers will help you respond to your lender and in some cases will deal directly with the lender on your behalf. They can help you prepare a financial statement and a budget schedule showing your income and outgoings.

This forms the basis of any negotiation, since it shows what you can afford. It allows you to draw up a payment plan and make a realistic repayment offer. Also see our guide on how to save for more tips on maximising your spare cash and minimising outgoings.

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