Mortgage borrowers get more time before repossession

The Chancellor yesterday provided a lifeline to those homeowners who are struggling to meet their mortgage repayments. He confirmed that some of the biggest mortgage lenders had agreed not to repossess properties until at least 3 months after borrowers first go into arrears.

Alistair Darling said that repossession would only be sought as a last resort after other alternatives. Many lenders will accept an arrangement to pay whereby the borrower enters a formal agreement to pay less than the required amount for a certain period of time. Whilst this does not remove the mortgage arrears problem, it does provide some time.

45,000 homeowners are expected to be repossessed by the end of 2008, with increasing unemployment partly contributing to the rise. Many economists have predicted that unemployment could rise to more than three million by 2010 and the number of mortgage borrowers in arrears is expected to reach around 200,000 by Christmas 2008.

The Council of Mortgage Lenders (CML) said that not everyone would be protected by the three month “moratorium” on repossessions because only a handful of lenders had agreed to implement it. Sub prime or buy to let mortgages from smaller lenders could still be repossessed within three months.

More people than ever are now looking to protect themselves in the event of redundancy or unemployment and sales of redundancy insurance are rising. These types of mortgage protection policies or income protection policies will pay a fixed amount each month in the event of redundancy, up to a maximum of 12 months. Click here to view redundancy insurance policies.