The threat of repossessions looms for thousands of homeowners across the UK as measures introduced to protect them during the coronavirus pandemic are lifted.
As of next month, borrowers will no longer be able to ask their lenders to defer mortgage payments and a moratorium on repossessions for mortgage arrears will be lifted. Mortgage holidays were introduced by the UK government back in March as a way to help those struggling financially as a result of the Coronavirus pandemic and lockdown.
One in six borrowers which equates to around 1.9 million people deferred repayments and took out a mortgage holiday after losing income during the pandemic. The initial mortgage holidays ran for three months from March until May with some homeowners choosing to extend them further.
Those who chose to extend their mortgage holiday or who took one out at a later stage will now have no choice but to begin making repayments or face repossessions. Not only do many homeowners now face having to restart mortgage payments but with the furlough scheme coming to an end, many now face the prospect of redundancy too.
While mortgage holidays are coming to an end, lenders have been asked to continue to support borrowers and are expected to work together to find the appropriate plan of action and support. This is however only advice and there will be no formal government scheme moving forward to help homeowners with repayments.
The government pledged back in March that taking out a mortgage holiday would not impact a borrower’s credit rating however those who did choose to make use of the scheme may find it harder to switch to another lender or take out other loans. This is due to the fact that historically banks look at several data sources when deciding whether or not to approve a loan.
Debt Advisor Sara Williams is one of many experts who have warned that many homeowners face a precarious and difficult few months as they restart making payments, “This is not really being talked about. I don’t know why the government is not doing something about it” she said.
She also called for reforms to Support for Mortgage Interest which is a government loan to help people repay interest only on their mortgages, not capital. Changes proposed include dropping a nine-month delay before loans can be applied for, lifting the cap of £200,000 on eligible mortgages and dropping a “zero earnings” rule that would allow borrowers to continue to work whilst they claim the loan.
Sara isn’t the only one calling for reform of the scheme either. James Heywood, head of welfare policy at the Centre for Policy Studies think tank said: “The pandemic has had a shattering impact on the livelihoods of many families, and there is a looming problem as many risk defaulting on their mortgages in the months ahead as the repayment holiday arrangements are wound down.
“The Centre for Policy Studies is urging the government to act now to make the Support for Mortgage Interest scheme fit for purpose to ensure hardworking families don’t lose their homes alongside their jobs. Otherwise not only will people be forced out of home ownership into the rented sector, it will also cost the state more to support them through housing benefit”.