The mortgage headache continues

Today’s arrears and repossessions figures confirm that we’re in our fourth consecutive year of high levels of home repossessions. It’s a worrying sign of how difficult economic conditions are – and of just how precarious so many people’s finances are. Sadly, thousands of people losing their homes is only part of the story. There are more than 150,000 households in serious arrears, i.e. more than three months behind on their mortgage payments.

The overall number of people in serious arrears is below the level reached in 2009, largely thanks to a duty on lenders to help struggling homeowners which campaigning by Shelter and Citizens Advice helped secure. This means that lenders are working with borrowers to manage their arrears and prevent the misery of homelessness. The campaigning also led to Support for Mortgage Interest (SMI) benefit being paid after 13 weeks of receiving certain benefits, rather than the original 39 weeks. But the rate at which SMI is paid has been cut from 6.08% to 3.63%.

A stubbornly large number of people are living with a ticking timebomb of a mortgage they can already barely afford to pay – many will find they can only get part-time work or no work at all. The SMI cut has seen many people falling short of their interest payments, just at the time when a number of lenders are hiking interest rates on their mortgage products. And as unemployment climbs again, it is inevitable that more people will fall behind in their mortgage payments: many are finding that the reduced SMI rate doesn’t cover their mortgage costs, and many will build up arrears. Further cuts to SMI are said to be on the table, and will only exacerbate the problem for struggling borrowers.

There has been much talk this week of the strivers, the people who work hard and have aspirations of climbing the career ladder and owning a home of their own. Owning a home is understandably what most people want – but it can quickly become a nightmare for those who lose their job or see their hours cut and find themselves among the large number of people behind in their mortgage payments, worried about losing their home.

It might be more appropriate for many people to be renting in such a choppy and unpredictable economy, rather than taking on massive financial commitments. But the short contracts and high rents in the private rented sector make it an unappealing option, particularly for families with children who need stability. Meanwhile, the help that private renters can get to pay the rent if their income dips or they lose their job has been cut too, which also could make it difficult for people to hold onto their home.

With owning, social and private renting all under pressure, the need for a comprehensive housing safety net has never been greater.

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