Mortgage Arrears to Rise In 2019?
According to the latest estimates, approximately 76,500 domestic mortgages were in arrears of at least 2.5% of their respective outstanding balance during the first quarter of 2019. Within this, around 23,500 of these domestic mortgages had fallen into major arrears of 10% or more of the outstanding balance.
In the buy-to-let sector, just over 4,600 mortgages were in arrears of 2.5% or more during this period. Of which around 1,200 had fallen into significant arrears of at least 10%.
While these are far from the worst figures on record, industry watchers expect to see overall mortgage arrears rise significantly in 2019. In the event of a no-deal Brexit, the resulting mortgage arrears increase could be catastrophic. Homeowners are feeling the pinch for a variety of reasons, though experts warn that the vast majority of severe mortgage difficulties are attributed (at least in-part) to inaction.
Rather than addressing issues head-on at the earliest possible juncture, struggling homeowners have an unfortunate habit of burying their heads in the sand.
What It Means to Be ‘In Arrears’
It comes across as a terrifying term, but to be ‘in arrears’ simply means to have missed one or more mortgage payments, which are now overdue. Contrary to popular belief, the overwhelming majority of responsible households across the UK occasionally lose track of their financial responsibilities. It’s worth remembering that something as simple as a failed direct debit can result in an important payment being missed.
Hence, it’s not always the case of the debtor having thrown caution to the wind – some payments are missed entirely by accident.
In all instances, however, the time to speak to your lender is the moment you realise you’ve missed a payment. Better yet, ahead of time upon realising you might miss an upcoming payment. Every late payment that isn’t brought to the attention of your lender could result in penalties and credit score damage – both of which can be avoided by coming clean as quickly as possible.
The worst-case-scenario outcome of falling into arrears is repossession of your home. Nevertheless, it’s worth remembering that lenders across the board don’t actually want to repossess properties. Repossession is a complex, time-consuming and expensive process, which almost always leaves all involved parties out of pocket.
As a result, there’s usually a way to avoid repossession in even the most challenging circumstances. Some cases may indeed be lost causes, but most aren’t. So if you’d prefer to be proactive rather than put your property on the line, here’s how to avoid outright catastrophe:
1. Speak to your lender
As already touched upon, the most important and urgent step to take is to speak to your lender. Don’t wait until you have already miss repayments – speak to them ahead of time and discuss a mutually beneficial resolution. You may find they’re far more accommodating than you’d have expected.
2. Seek independent debt advice
If you can’t afford to speak to an independent financial adviser, there are several non-profit organisations that can offer advice and support. Examples of which include the following:
- StepChange Debt Charity
- National Debtline
- Citizens Advice
- Christians Against Poverty
It may also be worth speaking to an independent broker to discuss transference of your current debt to a more affordable loan product.
3. Offer to pay whatever you can
If you are unable to meet your payment obligations in full, it’s still important to pay at least something. The reason being that this will demonstrate to your lender that you have absolutely every intention of doing the right thing and aren’t simply attempting to get out of the deal.
4. Avoid repossession with a bridging loan
Last but not least, it’s often possible to avoid repossession by applying for a bridging loan. By submitting your property as collateral, the funds needed to pay off your remaining mortgage balance in full can be provided within a matter of days. You pay off your mortgage, you sell your home for its full market value and you use the proceeds to pay back the bridging loan – all additional revenues being yours to keep.