Mortgage arrears and repossessions in England

Around 7.1 million households in England own their home with a mortgage (30% of all households), according to the English Housing Survey 2021 to 2022.

If a homeowner fails to keep up their mortgage payments, the mortgage lender may seek possession of the property through the courts to sell it and repay the loan. Mortgage lenders are required to follow certain steps to ensure repossession is used as a matter of last resort.

Cost of living: Mortgage support measures

The Bank of England interest rate rose from 0.1% in December 2021 to 5.25% in August 2023.

The bank estimates that by July 2023, around half of mortgagor households had increases in their repayments since late 2021. Higher rates are expected to affect most of the remainder of households by the end of 2026.

Responding to concerns about the financial impact of rising interest rates on those with mortgages, the Government, the Financial Conduct Authority (FCA) and mortgage lenders agreed a Mortgage Charter in August 2023. Signed by lenders representing approximately 90% of the mortgage market, the charter commits to additional measures to assist homeowners in managing their mortgage repayments and avoiding repossessions. For example:

• Customers who are up-to-date with payments can switch to a new mortgage deal with their lender at the end of their existing fixed-rate agreement without a new affordability check.
• Customers wanting to change the terms of their mortgage – for example, by switching to interest-only payments or extending their mortgage term – have the option to revert to their original mortgage deal within six months without affecting their credit score.
• Where a mortgage lender is seeking to repossess a home, there will be a minimum 12-month period from the first missed payment before there is a repossession without consent.

The Shadow Chancellor of the Exchequer, Rachel Reeves, has urged the Government to make the mortgage support measures mandatory for all lenders.

The Liberal Democrats have called for a temporary £3 billion mortgage protection fund to provide grants of up to £300 a month to homeowners struggling to pay their mortgage. The Chancellor of the Exchequer, Jeremy Hunt, has ruled out providing additional financial support for mortgage holders on the basis that this would add to inflationary pressures.

In addition to the new Mortgage Charter, the Government has:

• reformed the Support for Mortgage Interest scheme (see more below) to allow Universal Credit claimants to access support while working and to shorten the qualifying period households must get Universal Credit for before they can receive support
• provided £91.4 million funding in 2022/23 for the Money and Pensions Service to provide debt advice in England

The Financial Conduct Authority published guidance for firms supporting existing mortgage borrowers impacted by rising living costs on 10 March 2023.

UK Finance, the representative body for the banking and finance industry, has launched a national ‘Reach Out’ campaign to raise awareness of the support available to mortgage customers.

Mortgage arrears and repossessions

UK Finance reported there were around 90,700 mortgages in arrears of more than 2.5% at the end of June 2023. Around 1,100 properties were taken into possession in the quarter ending June 2023.

Mortgage arrears and repossessions are well below levels seen following the financial crisis in 2008. At the end of 2009, 216,400 mortgages were in arrears by more than 2.5% of their outstanding balance and 48,900 properties were repossessed over the course of the year.

Arrears and repossessions declined over the following years. This has been in the context of lower interest rates, a proactive approach from lenders in managing borrowers in financial difficulties and other interventions, such as the introduction of a Mortgage Pre-Action Protocol.

During the Covid-19 pandemic there was a slight increase in the number of households in arrears. Repossessions remained low due to various measures including an industry-wide moratorium on repossessions between March 2020 and April 2021. Mortgage arrears and repossessions have subsequently risen.

Assistance for households

Advisory bodies tell anyone with concerns about managing their mortgage to contact their lender as soon as possible to discuss the options available. There are several charities and organisations providing free, independent debt advice.

The Government’s Support for Mortgage Interest scheme provides financial assistance in the form of an interest-bearing loan for claimants of certain means-tested benefits. Commentators have called on the Government to strengthen the financial support available through the scheme.

Low-income households facing possession proceedings may be entitled to free legal aid. From 1 August 2023, the Legal Aid Agency has introduced a new Housing Loss Prevention Advice Service. Individuals who require this service do not need to meet legal aid financial eligibility rules, but they must be at risk of losing of their home.

Historical schemes to support homeowners

This briefing also outlines the temporary mortgage support measures that were put in place during the coronavirus pandemic, and those introduced as a direct response to the 2008 financial crisis.