Household finances have been badly stretched in the past year as the cost of energy has increased by 17% and the cost of food by 12%*. And the credit crunch means that the cost of new mortgages has increased, there are fewer mortgages available to choose from, and they are more difficult to obtain.
A borrower’s survival guide: CML, Citizens Advice and Shelter – 15 Aug 08
This is making life harder for the 1.4 million borrowers coming off cheaper, fixed-rate mortgages in 2008. But there are ways to help yourself and organisations to help you cope if you are struggling, according to the Council of Mortgage Lenders, Citizens Advice and Shelter.
No matter the size of your financial problems there are steps you can take to tackle them, and the CML, Citizens Advice and Shelter have worked together to come up with ten tips to help struggling households get through the tough times.
1. Get talking
If you are worried about your finances your first move should be to start talking: talk to your lender, talk to your partner, and talk to a free, independent debt adviser. The earlier you tell your lender, the more options available to solve the problem. Options that your lender may consider include: extending the term of the mortgage, changing the type of mortgage, deferring interest payments for a short period, and treating the arrears as part of the original debt.
2. Get advice
There are many organisations which offer free and independent money advice such as Citizens Advice, Shelter, National Debtline, and the Consumer Credit Counselling Service. Their debt advisers can assess your situation and devise the best course of action for you.
3. Plan ahead
If you are coming to the end of a fixed-rate mortgage in the near future start planning ahead for higher repayments and researching the best deals in the market now.
4. Don’t bury your head in the sand
Ignoring your debt problems will only make them worse. Positive action will help you find ways to solve them.
5. Pay your priority debts first
A mortgage is a priority debt as if you don’t pay this you could lose your home. Debt advisers can help you plan your budget and pay your priority debts first.
6. Pay what you can each month
If you can’t afford your full mortgage repayments, you should talk to your lender and still pay what you can afford.
7. Open all your post
Don’t ignore letters or telephone calls from your lender; if you are not sure what they mean ask your lender or a debt adviser. Open all mail that is addressed ‘to the occupiers’; if you are a tenant this is how the mortgage lender will contact you if the landlord has a payment problem.
8. Facing possession proceedings? Don’t panic
Always attend the court hearings yourself. Court proceedings do not mean that you will automatically lose your home. The court process acts as a final check to make sure repossession is the last resort. Some courts have advice desks which can provide last minute assistance.
9. Don’t abandon your property
If you are struggling with mortgage repayments you may be tempted to send the keys to your lender or abandon your property. Don’t do this without advice. You could still be responsible for the debt on the property and may be pursued for it years later.
10. Take care with “mortgage rescue”
Selling your home and renting it back might seem like a quick fix to your debt problems. But, many of these schemes offer very little security. They are also not regulated so you will not have access to the same protections as a mortgage holder.
CML Director General, Michael Coogan, said:
“The first step for anyone struggling to pay their mortgage is to contact their lender and get advice. There are a range of options your lender can consider to help reduce or reschedule your payments for a period of time while you get back on your feet.
“Lenders will treat you fairly and use repossession only as a last resort. If you take positive action to contact your lender, pay what you can, and show up to court and make your case, you are more likely to reach an agreement your lender that allows you to stay in your home. But you cannot just walk away and assume you are no longer responsible for the mortgage.”
Citizens Advice Chief Executive, David Harker said:
“We would urge anyone who is falling behind with payments on a mortgage or secured loan to speak to their lender and seek free, confidential, independent advice straight away.
“Getting advice, even at a late stage, can help the majority of people come to a workable agreement with their mortgage lender and can make all the difference between saving or losing their home.”
Adam Sampson, Chief Executive of Shelter said:
“Getting advice quickly is crucial in helping struggling homeowners keep a roof over their head. At Shelter we often see people when it’s too late, but the loss of their home could have been prevented if they had sought our help early on.
“With rising household bills and escalating food costs, it is understandable that many people are struggling with their finances. Help is out there but it is vital people don’t hide away from their problems and seek free independent advice as soon as possible.”
1. *Consumer price indices, July 2008, Office for National Statistics.
2. The Council of Mortgage Lenders’ members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.74 million mortgages in the UK, with loans worth over £1.2 trillion.
3. The Citizens Advice service is a network of independent charities that helps people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk
4. Anyone struggling with the cost of their mortgages or with any other housing problem should go to http://www.shelter.org.uk or call Shelter’s free housing advice line on 0808 800 4444.
5. Sources of free debt advice include:
* Citizens Advice – http://www.adviceguide.org.uk/
* Consumer Credit Counselling Service (CCCS) – http://www.cccs.co.uk/
* National Debtline – http://www.nationaldebtline.co.uk/
* Payplan – http://www.payplan.com/
* Shelter – http://www.shelter.org.uk/
* The Financial Services Authority – The industry regulator has a series of practical guides on managing money and financial products on their website: http://www.moneymadeclear.fsa.gov.uk/