World economy is still facig the threat after 'wall street bailout' and middle class is in crisis and fear for the insecure future.
The Government has stepped in to protect homeowners who are struggling to make mortgage repayments after fears that some lenders were too eager to repossess properties. These tips would help you hang on to your homes.
At the start of the summer more than 150,000 homeowners were at least three months in arrears. The number of repossessions is predicted to double this year to 45,000 and to keep climbing next year, according to the Council of Mortgage Lenders.
Gill Hankey, of the Bankruptcy Advisory Service, says: “In the real world, lenders are still being as aggressive as ever towards borrowers who are unable to make repayments.”
If you have slipped into arrears, you will not necessarily lose your home. There are steps that you can take to stay in your property and clear your debt.
Tips to hang on to your homes
Contact your lender
If your circumstances change, such as losing your job, contact your lender immediately. It might be willing to offer a repayment holiday of two or three months, which will give you the breathing space to make alternative financial arrangements.
Under the new rules announced this week, lenders should be more willing to lower your monthly costs temporarily or to increase the length of the loan term, which would also shrink the monthly payment.
Another possibility is to switch to interest-only payments. Mortgage payments on a £150,000 loan with an interest rate of 6 per cent would fall by £217 a month by switching from repayment to interest-only.
Work out a budget
Debt charities, such as the Consumer Credit Counselling Service (CCCS) or the National Debtline, can help with a budget plan to use when renegotiating the terms of your mortgage.
GE Money, the American lender, refers borrowers to the CCCS as soon as there is evidence that they are struggling to make repayments and the charity is talking to other lenders to set up similar arrangements.
Francis Walker, of the CCCS, suggests that it can be better to seek help from a debt adviser before approaching your lender with a proposal. She explains: “We often find that borrowers set up an agreement with a lender and then find that it is unaffordable. Customers are likely to say what they think is acceptable to the lender rather than what they can afford.”
Prioritise your debts
The most important thing is to stay in your home, so your mortgage repayments should be paid before other unsecured debt, including personal loans or credit cards.
If you need to stop paying these debts temporarily, write to the loan or credit card company and explain your financial situation. It may be willing to suspend repayments if you can prove that you will be able to start repaying the loan again in the future. You should also cut out unneccessary expenses, such as satellite TV subscriptions or club memberships.
There are also practical ways to raise your income. Mr Tapp points out that a recent client realised that she could make up the shortfall in her repayments by renting out a spare room to lodgers.
Do not be bullied by your bank
If you have missed one or two mortgage payments, it is likely that your lender will have been in touch to talk about your financial situation. Lenders can apply pressure on borrowers to pay arrears quickly - and the failure to do so has been used as grounds for repossession.
However, Beccy Boden Wilks, of National Debtline, says that you will not be evicted if you can demonstrate that you can afford to make monthly repayments and a small amount of the arrears each month. She adds: “Your lender might push you to clear arrears in 12 months, but ask if you can spread the cost over the term of your loan.”
You could also ask about adding missed payments to the loan, which is known as capitalising your arrears.
Be wary of sale-and-leaseback
Speak to a debt charity or financial adviser before considering sale-and-leaseback schemes, which are unregulated. This would involve the sale of your property to a company that would then keep you on as a tenant.
You could also contact your lender or local housing association about mortgage rescue plans, which work in a similar way to sale-and-leaseback.
Attend all hearings
If you do miss a number of monthly repayments, it is likely that your lender will write to you with a date for a repossession hearing.
It is crucial that you attend, says Ms Boden Wilks, because if you can demonstrate to the district judge that you are able to make your basic repayments, the judge will support your case.
However, if there is no way that you will be able to afford your monthly repayments, request that you are given time to sell the property yourself.
National Debtline: (For U.K)
0808 8084000, www.nationaldebtline.co.uk;
Citizens Advice: www.citizensadvice.org.uk; CCCS: 0800 1381111.
Little hope with negative equity
There are growing fears that negative equity could eventually exceed the levels seen in the early 1990s.
Standard & Poor's, the ratings agency, estimates that two million homeowners could owe more in mortgage debt than the value of their property by 2010.
However, Ray Boulger, of John Charcol, the mortgage broker, says that there are questions surrounding the headline-grabbing figures, adding: “Clearly, negative equity will increase until house prices stabilise. But there will be huge variations in the drop in house prices.
The massive housing bill approved by Congress this summer held out the promise that the Federal Housing Administration could help a homeowner find government-insured refinancing and such write-downs. But the relief will never be realized unless the financing industry is more willing to come forward and negotiate reductions.
If a mortgage represents more than 90 per cent of a property's value, borrowers could be forced to move on to their lenders' standard variable rates, adding hundreds of pounds to their monthly payment”
However, Mr Boulger adds: “As long as homeowners can afford their mortgage repayments there is no way that the lender will be looking to repossess their homes.”
Last month house prices fell by 12.4 per cent compared with the same month last year, according to Halifax, the UK's largest mortgage lender.
However, Mr Boulger adds: “As long as homeowners can afford their mortgage repayments there is no way that the lender will be looking to repossess their homes.”
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