Covid-19 & Dealing with Mortgage Debt
The coronavirus pandemic has had a devastating impact on all our lives. As well as health concerns, many have been struggling with financial issues. The option to apply for a mortgage holiday has now ended. Instead, lenders should offer "tailored support" to any mortgage holder struggling to pay.
Any mortgage holder who is struggling should pay as much as they can afford. Get advice and talk to your lender to let them know you need support.
What is "tailored support"?
The Financial Conduct Authority (FCA) published guidance for lenders. This includes guidance on support for people who are struggling with their mortgages because of the COVID-19 pandemic. Your lender should offer tailored support if
- you are struggling to pay your mortgage because of COVID-19, or
- your mortgage holiday has ended, but you are still having financial problems.
The lender has to consider your circumstances when deciding what support to offer. There are different options the lender can consider. Some of these are set out below.
A payment holiday or payment deferral
This may be offered as a short-term solution. It might be offered if your situation is in a state of flux and you cannot yet commit to longer-term solutions.
Reduced payments
Your lender may allow you to make reduced payments if you cannot afford your usual payment. This will be a short-term measure.
Extending the term of your mortgage
Your lender can agree to make the term of your mortgage longer. While you will pay less each month, you'll pay more overall as you are paying interest for a longer time. It is basically a remortgage.
Changing your mortgage type
Your lender may agree to change your mortgage type if this helps you to manage your repayments. This could allow you to change to a lower interest rate.
Your credit report
Lenders will tell credit reference agencies about any tailored support you get. Your lender should let you know if the support they offer will have an impact on your credit rating.
Applying for tailored support
How you apply for tailored support depends on whether you're getting a mortgage holiday.
Already getting a payment holiday
Your lender should contact you before the mortgage holiday ends. They will need to find out if you can afford to make resume your normal payments. If you can't, they should discuss options for tailored support with you.
Not on a payment holiday
Check your mortgage lender's website for a section about supporting customers during COVID-19.
Contact the lender as soon as possible to let them know you need support. It's best to do this before you miss a payment. When you talk to your lender make sure you understand all the options. Ask how these options will impact on your future payments and your credit rating.
Can your mortgage lender take you to court?
Lenders should only take legal action against a mortgage holder as a last resort. This should only happen if all other attempts to resolve the payment problems failed. The lender might take you to court if
- you cannot agree a payment plan or
- you break the terms of a payment plan.
It's important to get advice if your lender is starting legal action against you. You could lose your home if you ignore this problem.
Court process
The courts adjourned all existing repossession cases last year. Lenders can now contact the judge who deals with these cases, (the Chancery Master), to ask:
- for permission to resume a case that had been adjourned, or
- for permission to begin a new legal case against a mortgage holder.
If your lender does this you should get notice at least 6 weeks before the Master considers your case. You should receive a letter saying your case is listed for an administrative review. Contact Housing Rights urgently if you get a letter from the court. We can explain what information you need to give the Master to help your case.
Enforcement and eviction
The FCA told lenders not to enforce any possession orders during the pandemic. Enforcing an order is the last step in repossession. At this stage the borrower must leave the property.
Since 1 April 2021 the FCA has allowed lenders to start enforcing orders. But, this should only happen as a last resort and if it is appropriate to do so. Lenders need to consider whether any person in the property is particularly vulnerable due to COVID-19.
Get advice now if your lender has already got a possession order for your property.
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