How to Stop Your Home Repossession

As the cost-of-living crisis continues to have a serious impact on homeowners, understanding how to stop your home from being repossessed becomes increasingly important. The latest data from UK Finance reveals that between January and March this year, over 1,000 homes were repossessed, with a 2% increase in homeowner mortgages in arrears of 2.5% or more. For those with variable-rate mortgages, the continued strain of interest rate hikes since December 2021 means even more people may soon face repossession, while individuals under fixed-rate mortgages brace for impending cost spikes upon remortgaging.

During these financially trying times, it’s essential to understand what happens when you fall into mortgage arrears and explore strategies to stop home repossession.

Understanding the Risk of Repossession

As a homeowner, it’s essential to comprehend when missed payments become a risk for repossession. While technically falling into “arrears” happens as soon as you miss a mortgage payment, the majority of lenders often allow an unofficial period of around 15 days before they get in touch to find out what’s going on. Even then, a repossession will not be the lender’s first course of action. Instead, a lender will look to help you get back on track — if this is possible —then go through the time-consuming and costly process of “possession action”, i.e. repossessing your property. 

Furthermore, the Financial Conduct Authority (FCA) — the regulator of all mortgage lenders — requires compliance with their Mortgage Conduct of Business (MCOB) rules. These rules apply to any mortgage contract that commenced after 31 October 2004 and stipulate that a lender must only seek repossession of a customer’s home after all reasonable attempts to resolve the situation have failed. 

Most lenders will not consider starting repossession proceedings until at least three payments have been missed. Some will be more lenient if the homeowner can show they have plans in place to clear their arrears and resume regular payments. 

Am I Protected from House Repossessions?

Previously, in response to the COVID-19 pandemic, the FCA introduced a moratorium on house repossessions. The moratorium served to protect borrowers and allow them to comply with government guidance on social distancing and self-isolation. However, this protection has now lapsed and therefore the moratorium no longer protects borrowers.

Over the past year, approximately 1.9 million people (one in six borrowers) took advantage of mortgage holidays, which allowed them to defer payments for up to six months. As these holidays and the moratorium come to an end, homeowners will have to resume monthly payments or face the possibility of repossession. 

What Is the House Repossession Process?

To effectively avoid repossession, it’s crucial to understand the steps involved in the repossession process:

• Lender Contact. If you’re more than 15 days late making a monthly payment, the mortgage lender will get in touch to find out what the problem is. Lenders must comply with the Pre-Action Protocol for Mortgage Arrears, which requires them to notify the borrower that they are in arrears and allows them to rectify the situation.
• Seeking a Solution. The FCA requires mortgage lenders to treat borrowers fairly. The lender must work with you to find a solution to your financial situation and exhaust all reasonable avenues of support before starting the repossession process. This might include a “repayment plan” whereby the lender agrees to accept reduced payments for a fixed period or to permit a short respite from payments altogether. 
• Possession Action. This marks the official start of the repossession process. The lender will apply for a “possession order” and send you paperwork regarding the proceedings.
• Court Hearing. If the case goes to court, the homeowner must attend. Failure to present yourself at court could result in an outright possession order — when the court grants your lender the right to repossess your home.
• Court Decision. If an outright order is issued, you must vacate the property within four weeks. A suspended order allows you to stay in your home, provided you comply with the schedule of payments provided — this will stipulate a fixed amount above your regular payments until the arrears are cleared.

If you fail to comply with the terms of an outright or suspended court order, bailiffs may be granted permission to evict you.

Once the repossession process is complete and you have left the property, the lender will proceed to sell your home. They are entitled to recover the remaining balance on the mortgage in full, not just the arrears. The lender can also charge interest on the mortgage debt until the property sells and recoup any selling costs incurred. If there is any money left from the proceeds of the sale once all of these costs are covered, this will be returned to the borrower.

How to Stop the Repossession of Your Home

• Open Communication. As soon as you begin to experience financial difficulties and miss a payment, contact your lender. Ignoring the problem will not make it go away and the sooner your lender is aware, the sooner they can help you.
• Cut Unnecessary Expenses. Keeping a roof over your head is more important than non-essential ones such as a gym membership. Evaluate your monthly income and monthly outgoings and identify any cuts you can make, even if just for the short term. 
• Seek Professional Advice. Several organisations offer free debt management advice, such as Citizens Advice, National Debtline, Shelter and your local council. The pre-action protocol requires a lender to cease — or pause — court action if you need time to seek independent debt advice or are awaiting a confirmed appointment.
• Create a Repayment Plan. Assess your finances and decide how much you can pay each month until your financial situation improves. Agree on a repayment plan with your lender that reduces the monthly payment for a fixed period.
• Explore Government Support: Depending on your circumstances, you may be eligible for government assistance programs that can help you with your mortgage payments. Investigate available options in your area and see if there are any subsidies or grants that can provide temporary relief.
• Legal Assistance: If you find yourself facing the possibility of repossession, consider seeking legal advice. A qualified attorney can help you understand your rights, navigate the legal process, and explore potential defences against repossession.
• Consider Selling Your House. If your financial situation is unlikely to improve within a reasonable amount of time, selling your house may be the best option. The more debt that accrues, the harder it will be to recover. If your house is repossessed, this will also affect your credit rating, which could make it difficult to get a mortgage in the future. A house repossession will stay on your credit report for six years from the date of the first missed payment. Selling your house could provide sufficient funds for you to cover the cost of your mortgage, repay the arrears and leave you with money left over to start anew. 
• Credit Repair: If you’ve already gone through the repossession process and need to rebuild your credit, consider working with a credit repair agency. They can help you take steps to improve your credit score and financial stability over time.

Nobody wants to face repossession of their home, but if you find yourself struggling to make your monthly mortgage payments, the best course of action is to face the problem head-on. Be honest with your lender and be realistic about your financial situation long-term. Securing a quick house sale could be the best solution and one that leaves you with cash-in-hand to make a new start.

House Buyer Bureau is a transparent and honest house cash buyer. We will discuss your options with you and provide a fair cash offer for your home. If we do not think our service is the best choice for you, we will say so. We’re proud of our reputation as one of the best quick house sale companies in the market. House Buyer Bureau is one of only a handful of buyers recommended by The Advisory, the independent authority on everything related to house selling.

Check out our FAQs for more information or contact our friendly team of experts today to find out more about our services.

Chris

Chris

Chris has worked in property all his career, first as a successful estate agent before spotting a gap in the market for buying property directly from people looking for a simple, quick sale.

He has a passion for property and as an experienced valuer, has looked at well over 50,000 properties so far at HBB. He has extensive experience in property buying and regularly comments in the press on property matters, trends and promotes ways to simplify and speed up the selling process.

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