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British adults are £1,189 more in debt than they were a year ago

The financial impact of the pandemic has been felt everywhere in the UK. Data from The Money Charity shows that for many, it’s not only affected savings and investments but also overall debt. Between June and August 2021, an average of 305 people a day in England or Wales declared insolvency or bankruptcy.

Added to this, figures from the Office for National Statistics show that by December 2020, almost nine million people had to borrow money to make up for a reduction in income or additional expenses during the pandemic. People on lower incomes were more likely to get into debt, need to borrow money or have their finances affected as a result of the pandemic.

How the country is faring

When it comes to personal debt, it turns out the UK is not faring so well. In fact, Brits are now £62.9 billion more in debt than they were back in July 2020. This equates to an extra £1,189 in debt per adult.

The average household now has a debt of £62,670, including a mortgage. This translates to £32,931 per adult. Perhaps more scary is the fact that estimates for 2025 see the total rising to an average of £82,641 per household if things continue moving in the same direction.

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If you take away mortgages, the average adult in the UK now has about £3,734 in unsecured debt, including £1,067 in credit card debt. For those making the minimum payment, it will take 24 years and nine months to repay the entire amount.

Dealing with your debt

If you’re one of the many Brits struggling to keep up with bills, a good first step is to tally up everything you owe. This includes not only credit cards and loans but also household bills you might have fallen behind on. Research shows that over six million Brits have fallen behind on at least one household bill as a result of the pandemic, and a significant 1.2 million haven’t been able to keep up with their rent payments.

Once you understand what you really owe, it’s time to make a few phone calls to your providers to figure out payment plans or see if you can get extra time to pay. This is important for things like your mortgage, as The Money Charity points out that more than two properties a day were repossessed between April and June this year for missed payments.

Reducing expenses

Since the end of the lockdown, expenses in the average household have increased significantly. This is good news for the economy, as people are shopping and eating out again. But as a consumer, if you’re not careful, it can spell trouble for your bank account.

Now is a good time to redo your budget and make sure you’re not overspending. If a monthly budget feels overwhelming, start with a weekly one. Revise it regularly until the numbers add up. Don’t forget to give yourself an amount for fun post-lockdown spending.

If you are overwhelmed with debt and cannot make minimum payments, it might be worth talking to a debt advice service such as the StepChange Debt Charity. They can advise you on your rights and how to move forward in the best possible way.

By Diana Bocco

Source: The Motley Fool

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Possession claims double as evictions ban ends but are way off ‘normal’

Evictions by landlords and letting agents have restarted with earnest following the recent relaxation of court and bailiff restrictions, latest official figures show. The Ministry of Justice (MoJ) reveals that between April and June this year, possession claims more than doubled from 3,023 to 7,000; orders from 656 to 5431; warrants from 274 to 3,709 and repossessions from zero to 1516.

But, when compared to the same quarter in 2019, these actions have decreased by 74%, 75%, 73% and 80% respectively.

The evictions data reveals how the ongoing delays and complications of evicting tenants unless they are in serious rent arrears has prevented the ‘tsunami’ of eviction that had been predicted by some campaigning groups.

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For example the MoJ figures also show that the median average time from claim to eviction has increased to just under 60 weeks, up from 19 weeks in the same period during 2019.

Nevertheless, repossession activity in the courts is beginning to ramp up, as is bailiff activity following the lifting of restrictions on 1st June.

But lobbying group Generation Rent is worried that many tenants are still facing eviction.

alicia kennedy evictions“There are thousands more who have lost work and got behind on their rent during the pandemic, and will find it difficult to repay that, even if their income recovers,” says Director Alicia Kennedy (pictured).

“It is almost impossible to move to a new home if you’re relying on benefits, so these renters face huge uncertainty in the months ahead while they wait to be told when the bailiffs will arrive.

“Only a Covid Rent Debt Fund to clear these rent arrears will help renters back to their feet and remove the threat of homelessness from thousands of families. The government must act urgently to relieve this hardship.”

By Nigel Lewis

Source: The Negotiator

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Call For Government Action To Avoid Arrears Crisis

Landlords in England are being forced into a corner because tenants are not being given the financial support they need, said the National Residential Landlords’ Association this week.

Many landlords now have to make a choice between accepting no income or resorting to repossessing their property, it claimed.

A high proportion of private landlords have allowed rent free periods during the coronavirus crisis, or allowed rents to be deferred. Six in ten of these have absorbed the lost income by using personal savings. But ‘the goodwill of landlords in the face of mounting rent debts cannot continue without support from the Treasury’, warned NRLA.

Its latest survey estimated that over 800,000 people living in the private rented sector in England and Wales now have rent arrears that have been built up during since the coronavirus lockdown. Of this group, eight in ten were not in arrears prior to the start of the pandemic.

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‘To help resolve this crisis, the Government should introduce new measures to bring housing benefit support back into line with market rents’, said NRLA. ‘Government data shows that across the UK, in February 2021, 55 per cent of private rented households in receipt of Universal Credit which included housing cost support, had a gap between that and the rents they paid. The average shortfall was £100 a month. Despite this, the Chancellor froze local housing allowance rates in cash terms from April this year, a decision the Institute for Fiscal Studies branded “arbitrary and unfair” ‘.

The NRLA is calling for the Local Housing Allowance to return, at the very least, to a level that will cover the bottom 30 per cent of market rents in any given area, but preferably for it to be increased to a level that covers average rents. It also wants a Government guaranteed, interest free, hardship loan scheme to help tenants pay off rent arrears built since the lockdown began.

‘The Chancellor has clearly decided on a strategy of making landlords the scapegoats for a crisis of his own making’, claimed NRLA chief executive Ben Beadle. ‘For less than the cost of the Eat Out to Help Out Scheme he could provide landlords and tenants with the financial support they need to keep tenants in their homes and prevent damage to credit scores.

‘Landlords want to sustain tenancies wherever possible, but without the support so many tenants desperately need, the Chancellor will need to accept the tragic costs of his failure to act’.

Source: Landlord Knowledge

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Pandemic property repossessions on the rise

Despite record house price highs and huge levels of buyer demand, since the start of the pandemic 4,320 homes have been repossessed across England and Wales. A fifth of those have been in the North West, according to newly released data from YesHomebuyers.

With the current stamp duty holiday spurring a property market frenzy, house prices have boomed. The latest UK House Price Index shows that the North of England is leading the way, with both the North West (11.9%) and Yorkshire and Humber (10.9%) registering the highest rates of annual growth, while the North East (9%) isn’t far behind.

However, research from the homebuying platform, highlights that the North of England has seen by far the most property repossessions since the start of the pandemic, with the North West, in particular, home to the highest level.

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Property repossessions are executed by a lender, usually the bank or building society when the owner of a property fails to make the interest payments on any debt secured against their home.

Most repossessions by region

The North West has seen the highest number of repossessions during the pandemic, accounting for 20% of the total number seen across England and Wales. The North East has also seen a large number of repossessions, accounting for 16% of the national total, while Yorkshire and the Humber rank third at 14%.

Collectively, the North of England has accounted for 50% of all property repossessions seen across England and Wales during the pandemic. In contrast, the East of England has accounted for just 2% of pandemic repossessions, with the South West (6%) and East Midlands (7%) also seeing a low proportion.

The property price cost of a repossession

Traditionally, having your property repossessed would mean it selling on the open market for a far lower price. However, since the government bailed out the big lenders in the wake of the 2008 Credit Crunch, they have been under far greater pressure to prove that they have ‘Treated the Customer Fairly’ (TCF) by achieving the best price possible

Figures show that this price achieved varies across the country but on average, repossessed homes in England sell for around 77% of market value. Although they can regularly achieve as high as 95% of market value, according to founder Matthew Cooper, who previously worked managing repossessed homes for a number of lenders.

Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented: “The repossession of a home can be a very traumatic experience and although new guidelines are in place to ensure the lender achieves the highest price possible, it’s the last thing any homeowner wants to go through.

“Contrary to popular belief, home sellers in financial distress account for a very small percentage of those opting to use a quick sale platform such as Yes Homebuyers. While it does provide greater speed when transacting, as well as allowing the homeowner to maintain control of their sale, we actively advise against it if there is a more favourable option available.

“Opting for our services should really be the last resort and our advice to any homeowner is to be proactive and get your property on the market at a realistic price. Always, always communicate with the lender to let them know you’re doing everything possible and try and buy the time to get a normal sale done for the best price possible. This will put you in the best possible position to get a handle on any debt you owe, while providing the best possible foundations to move forward.”

Source: PROPERTY REPORTER

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Increases in mortgage arrears expected this year

MORE home-owners are expected to fall into mortgage arrears this year as the economic repercussions of the coronavirus pandemic continue to be felt, according to UK Finance.

The trade association, which represents the banking and finance industry, said mortgage arrears remained close to historically low levels in the first three months of 2021.

From March 2020 to the end of March this year, lenders were offering payment holidays of up to six months to borrowers whose finances had been affected by the coronavirus pandemic.

Nearly 2.9 million mortgage payment deferrals were granted while the scheme was active.

For borrowers who need additional support beyond the six-month payment holidays, lenders are continuing to offer tailored support.

UK Finance’s latest figures show a small increase of 230 mortgages in arrears compared with the previous quarter, with a total of 77,640 home owner mortgages in arrears of 2.5% or more of the outstanding balance.

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Within the total, there were 27,280 mortgages with significant arrears representing 10% or more of the outstanding balance. This was an increase of 620 on the previous quarter.

UK Finance said this figure has slowly increased since early 2020 but from a low base, largely driven by customers who had several missed payments before the pandemic.

Eric Leenders, managing director of personal finance at UK Finance, said: “While there was a slight rise in total arrears in quarter one 2021 compared to the historic low levels seen before the pandemic, the additional support from lenders has helped many mortgage customers stay out of arrears.

“With the economic impact of Covid-19 continuing to be felt, we anticipate there will be further increases in mortgage arrears during 2021.

“Any customer who is concerned about their finances should contact their lender early to discuss the options and tailored support available to them.”

Only 190 home-owner mortgaged properties and 180 buy-to-let mortgaged properties were repossessed in the first quarter of 2021.

Although Financial Conduct Authority (FCA) guidance allowed firms to re-start litigation activity from November 2020, lenders voluntarily committed to pause repossessions in line with a “winter truce” from mid-December 2020 to mid-January 2021, UK Finance said.

It added that repossessions are expected to eventually increase due to the backlog of cases that did not take place in 2020.

These cases will have been in train before the pandemic, it said, adding that repossessions are always a “last resort”.

Source: Irish News

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Mortgage prisoners frustrated as MPs shun law change

Mortgage prisoners hoping for an end to high interest rates have been left frustrated and angry as MPs voted down a proposed law change that could have cut their bills by hundreds of pounds per month.

Mortgage prisoners are borrowers who took out high-interest home loans with lenders such as Northern Rock, which went under during the 2008 financial crash.

Because their mortgages were sold on to investment firms that do not offer new mortgages – known as ‘closed books’ – many have been trapped on standard variable rates as high as 9 per cent, at a time when wider interest rates have fallen to rock-bottom levels.

Many are on interest-only deals and cannot switch to a repayment mortgage, leaving them facing repossession when their term ends. There are estimated to be a quarter of a million mortgage prisoners in the UK, and the problem a ticking timebomb.

MPs voted down an amendment to the Financial Services Bill, which would have introduced a cap on the standard variable interest rates that mortgage prisoners pay.

This would have been no more than 2 percentage points above the Bank of England’s base rate, which would currently make it 2.1 per cent.

According to campaign group the UK Mortgage Prisoners Action Group, this could have cut some borrowers’ payments by up to £800 per month.

The amendment would also have made new fixed interest rate deals available to mortgage prisoners who met certain criteria, such as not being in arrears.

In a House of Commons debate on Monday night, 355 Conservative MPs voted to scrap the amendment, while 271 MPs from Labour and other parties voted to keep it.

Two Conservative MPs, Peter Bottomley and Royston Smith, voted against the Whip to support the move.

Mortgage prisoners usually find that other lenders will not accept them because banks and building societies adjusted their affordability requirements post-financial crisis and they now do not qualify.

Some have also fallen into arrears due to their high payments.

As a result, they say they have suffered financial hardship, but also emotional distress including mental health problems and family breakdowns.

Speaking to This is Money, Rachel Neale, head of the UK Mortgage Prisoner Action Group which represents around 4,000 borrowers, described the result of the Commons debate as ‘heavily disappointing’.

‘We have had 13 years of this, and we have still heard nothing of any tangible, practical solution,’ she said.

‘I don’t believe MPs really understand the mortgage prisoner’s situation,’ she added.

‘They are continually comparing us to borrowers in the open market, when we’re not in an open market – we’re essentially paying debt collectors.’

‘The Government are offering mortgage guarantees to first-time buyers – why not us?’

Neale is now calling for Government-backed mortgage guarantee scheme for mortgage prisoners, similar to the scheme it has just launched for first-time buyers.

‘We want a mortgage guarantee like the Government is offering first-time buyers,’ she said.

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‘They have no borrowing history, whereas we are borrowers who have been on high interest rates – and paid them – for 13 years.’

Because of the objection to the mortgage prisoner amendment, and one other in a separate part of the bill, the Financial Services Bill will now go back to the House of Lords for further debate later today.

The Lords voted through the bill 12 days ago, but it will be impossible to pass the legislation to help mortgage prisoners without the support of MPs in the House of Commons.

The Lords will either agree to the bill in its new form, or disagree and make alternative proposals.

If the latter happens, it will need to go back to the House of Commons again. This process is known as ‘ping pong’.

This is Money understands that Labour lords do not plan go against the Government’s position on the mortgage prisoner amendment in today’s debate, which would have kept the issue on the table.

It is unclear whether there is a way that the amendment could still be passed.

Treasury ‘will work with FCA’ on new solution – but prisoners say it could be too late

Speaking in the Commons, MP John Glen, the Treasury minister who has led the opposition to the amendment, cited Financial Conduct Authority analysis which, he said, showed that half of mortgage prisoners were not prisoners at all, because they would be eligible to switch mortgages if they chose to.

He also said the SVR cap would be ‘deeply unfair’ to borrowers in the mainstream mortgage market who were in arrears or unable to secure a new fixed-rate deal, as they would not be able to benefit from the same interest rate reduction.

On the point about offering mortgage prisoners new fixed-rate deals, he said: ‘Lending remains a commercial decision based on a variety of factors and it would not be right for the Government to compel lenders to provide products for specific groups.’

Glen announced that the Treasury would work with the FCA to review its data on the characteristics of mortgage prisoners.

However, Neale spoke of her fear for people who might not be able to hold out that long.

‘We now have to sit and wait with no other resolution while John Glen obtains more data, which means we could be stuck in this situation until next year,’ she said.

‘My real fear and worry is for people that are on a cliff edge facing repossession.

‘If they want to delay things for another six months while we are coming out of Covid, the Government should put a moratorium on repossessions for people on closed books.’

Glen also said the FCA would review how effective a previous policy to remove regulatory barriers to switching for mortgage prisoners had been, and would report on this by the end of November.

Since October 2019, lenders have been able to use a modified affordability assessment for mortgage prisoners, which means they can choose not to ask for evidence of a customer’s income and expenses or apply a stress test.

However, this is not compulsory on the part of the lender, and the UK MPAG says many mortgage prisoners are not able to benefit.

It said that it was only aware of 40 mortgage prisoners that had benefited from this to date.

‘As far as we know, it has only helped 40 people,’ said Neale. ‘And that was supposed to be the big golden nugget.’

Another way that mortgage prisoners may be able to get help is by bringing legal action against the private companies that now control their loans.

The law firm Harcus Parker is currently working with some mortgage prisoners in order to pursue such claims, but the process is at an early stage.

By HELEN CRANE FOR THIS IS MONEY

Source: THIS IS MONEY

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Around 840,000 tenants face pandemic evictions: NLRA

Around 840,000 tenants who have fallen into arrears are in danger of losing their homes as a result of the pandemic, according to data from the National Residential Landlords Association.

The landlord’s body says that seven per cent of private renters have built up arrears since the UK’s series of national lockdowns began last March.

The average arrears were between £251 and £500, though 18 per cent, or approximately 150,000, of those with rental debts owed more than £1,000.

The NRLA says: “These debts are increasing to the point where there is no hope of many being able to afford to pay them back. The outcome will be that most will have to leave their homes as emergency measures taper down from June.”

The body claims that although most landlords have been working with struggling tenants to help keep them in their homes as far as possible, 60 per cent have lost rental income as a result of the pandemic. Of these, 39 per cent said their losses are mounting.

The intervention comes as courts begin to hear possession cases again following a six-month stay on proceedings imposed by the Financial Conduct Authority due to the pandemic.

Courts are hearing the most serious cases such as those related to anti-social behaviour, criminal activity such as fraud, and where arrears were amassed before lockdown measures began.

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However, the NRLA said the justice system is facing “strains” in this area, as they are “hearing the relatively few cases that are being allowed to go ahead”.

The body has called for video links to speed up cases.

It has also renewed its call for a package of hardship loans and grants for affected tenants to pay off arrears built since the beginning of the health crisis, so tenants can stay in their homes and are prevented from facing damaged credit scores.

NLRA chief executive Ben Beadle says: “While many landlords and tenants have worked well in responding to the challenges posed by the pandemic, we are now at a crunch point. As the country follows the roadmap out of lockdown, so too emergency measures in the rental market will need to be eased.

Beadle adds: “Ministers need to ensure the tenants have the financial means to pay off rent debts built as a result of the pandemic. Without this, they will have to accept the inevitable consequence of rising homelessness and damaged credit scores.”

Repossession claims by private landlords in the final three months of last year fell by 37 per cent compared to the same period in 2019, according to Ministry of Justice data released last month.

However, the Ministry of Justice statistician said these early figures, which cover England and Wales, should be treated with “caution”.

The statistician adds: “While these statistics are of interest to the public, it is worth noting that the small volumes of repossession actions mean that the data is unlikely to be representative of general trends in possessions. Caution should therefore be used when interpreting and applying these figures.”

By Roger Baird

Source: Mortgage Strategy

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Home repossessions allowed from April but as last resort

Home repossessions may take place from April but only as a last resort, the City regulator has said.

A ban is in place on home repossessions except in exceptional circumstances until April 1.

The Financial Conduct Authority (FCA) has published updated draft guidance for firms from April.

Firms will only be able to enforce repossessions if they act in line with the guidance and should treat customers fairly.

The FCA said: “Repossession should only take place as a last resort if all other reasonable attempts to resolve the position have failed.

“Firms will also need to comply with any relevant legislative requirements which may prevent firms from enforcing repossession in certain parts of the UK.”

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The FCA is inviting feedback on its proposals by 10am on March 10.

It said delaying home repossessions can lead to poor customer outcomes as debts mount and therefore it proposes to allow firms to repossess homes when it is fair and reasonable to do so.

The regulator is also reminding borrowers that the deadline for payment holiday applications is March 31.

From April 1, consumers who are newly impacted by coronavirus, or find themselves impacted again, should still receive tailored support from their lender which reflects their individual needs and circumstances.

The FCA said it will continue to monitor and supervise how firms are implementing its guidance, to ensure they continue to provide consumers with support that reflects the challenges that they face. It will publish the findings of its initial supervisory work in this area by the end of March.

By Vicky Shaw, PA Personal Finance Correspondent

Source: Belfast Telegraph

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Nearly 800,000 home-owners are ‘vulnerable to repossession’

Nearly 800,000 households across the UK could be at risk of home repossession if they suffer a loss of income, according to analysis by a think-tank.

The Social Market Foundation said that of the 770,000 it calculates may be at risk of repossession, a quarter (26%) work in retail or manufacturing, sectors badly hit by the pandemic.

SMF research funded by the Building Societies Association (BSA) suggests more than one in 10 owner-occupiers do not have enough savings to cover a single month’s mortgage payment.

A ban on home repossessions has been put in place as part of coronavirus support measures and borrowers have also been able to take mortgage payment holidays.

Opinium polling of 2,000 mortgage-holders commissioned for the SMF found 29% had seen their household savings decrease during the pandemic.

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Close to 800,000 home-owners could be at risk of losing their home during these turbulent economic times

Scott Corfe, Social Market Foundation

Nearly half (46%) of mortgage-holders on incomes up to £20,000 said they have seen their savings decline.

The SMF suggested that a time-limited hardship grant could protect households from building up additional financial burdens.

Research director Scott Corfe said: “Close to 800,000 home-owners could be at risk of losing their home during these turbulent economic times.”

Paul Broadhead, head of mortgages and housing at the BSA, said: “With the growth in wealth and income inequality as a result of the Covid-19 pandemic, it’s now more important than ever to look at all possible options that could help home-owners who are struggling to meet their mortgage payments beyond lender forbearance.

“There isn’t one single solution that will support all those in need. Stakeholders, including Government and lenders, need to work together to ensure that home-owners and families, whether they’re dealing with temporary or longer lasting financial difficulties, have the best chance of overcoming their difficulties and enjoy a home which is financially sustainable.

“I hope that the findings in this independent report will stimulate debate and that a range of flexible and compassionate options can be found to create positive futures for those whose prospects may currently feel pretty bleak.”

The SMF analysed the Wealth and Assets Survey as part of its research.

By Vicky Shaw

Source: Belfast Telegraph

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Home repossessions to leap more than ten-fold by 2022

A UK Finance forecast suggests UK mortgage arrears and repossessions will surge after the debt payment moratorium ends on 1 April 2021.

The regulator is keeping this date under review, but UK Finance forecasts suggest we could see home repossessions rise from 2,900 last year to 22,300 by 2022.

Mortgage arrears will also rise to 142,200 this year from 81,300 last year according to the trade body, but fall back to 120,900 in 2022.

A UK Finance spokesperson said: “Possessions last year reached an historic low due to the moratorium introduced in March 2020, alongside the unprecedented support provided by lenders to customers impacted by Covid-19. However, we anticipate possessions will likely increase as these emergency measures are lifted and lenders work through cases that have been put on hold, most of which were already in train before the pandemic.”

He said the number of possessions is forecast to remain well below the levels seen a decade ago and lenders will continue to show flexibility to borrowers in financial difficulty, turning to possession only as a last resort after a thorough court-based process has carefully considered the borrower’s individual circumstances.

“There is a range of tailored support available and possession is only ever a last resort, so we would urge customers facing financial pressures to get in touch with their lender to discuss the best solution for them,” he said.

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FCA guidance released this month: ‘Mortgages and Coronavirus: Tailored support guidance‘ outlines the protocols mortgage lenders and other financial firms should employ if borrowers are struggling.

Its payment deferral guidance confirms all borrowers can delay payments for up to six months as long as the last monthly installment is no later than July 2021.

All customers should receive appropriate forbearance from their lender and the regulator states: “Customers should receive the support they need in managing their finances, including through self-help and money guidance. Firms should signpost or refer them to debt advice if this meets their needs and circumstances.”

The regulator offers consumer guidance here to share with clients, including speaking to the lender in the first instance and repaying anything toward the monthly payment, even a reduced amount.

Sue Anderson, spokesperson at debt charity Stepchange said: “While we haven’t yet experienced the tsunami of demand for debt advice that is forecast to arise when temporary forbearance ends, we know it is coming. The tenfold forecast increase in mortgage repossessions by 2022 anticipated by UK Finance is obviously a real worry. Housing insecurity, across both the rented and owner-occupied sectors, looks to be one of the most damaging impacts from the pandemic if left unchecked.”

Anderson added that StepChange anticipates increased demand for holistic advice on housing and other debt that will emerge as payment deferrals and other temporary help unwinds.

“The ban on rental evictions and mortgage repossessions and the extension of payment deferrals have all been important in keeping people hit financially in their homes, but it’s abundantly clear that we also need long-term plans to address the household debt legacy that the pandemic will leave in its wake,” she said.

“Revisiting Support for Mortgage Interest should be a part of this – the safety net isn’t currently fit for purpose in supporting households to keep their homes in the post-Covid landscape,” said Anderson.

By Victoria Hartley

Source: Mortgage Solutions

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