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Mortgage arrears: how to avoid it and what to do if you can’t pay

5 mins read
by Unbiased Team
Last updated Friday, March 15, 2024

It can be worrying if you fall behind on your mortgage, but it’s best to understand your options and act. Here’s everything you need to know.

After almost 15 years of low interest rates, mortgages have become much more expensive very quickly. 

It’s predicted that the number of people in mortgage arrears will increase over the next year.

But how do you avoid mortgage arrears – and what should you do if you fall behind on your mortgage? Here’s everything you need to know. 

What are mortgage arrears?

'Mortgage arrears’ essentially means you’re behind on your mortgage payments.  

Most mortgage providers won’t consider you in arrears until you’ve missed two payments, but any missed payments will be recorded on your credit file and will remain there for six years. 

More people are at risk of falling into arrears due to the fixed-rate mortgage ticking timebomb. 

Around 1.6 million borrowers’ mortgage deals will end over the next year, taking some from 2% mortgages to around 5% to 6%.  

What happens if your mortgage is in arrears?

Your mortgage provider will get in touch shortly after your missed payment to find a way to resolve the situation. Repossession of your home is a last resort. 

If you know you’ve missed a payment, or are about to, contact your lender.

Talking to your lender won’t impact your credit score and can prevent you from having a missed payment on your credit file. 

Even if you miss a payment, future lenders will take a better view of the situation if you’ve been honest with them. 

In line with the banking code of conduct, your lender must treat you fairly – particularly if you’re trying to resolve the situation. 

There are lots of options, which include: 

  • Working out a payment plan: You could pay more over a longer period, rather than repaying your arrears as a lump sum. This is the best option if you missed payments due to short-term financial trouble and know you can get back on track.

  • Switching to an interest-only mortgage: For a set period, you’ll only pay interest on what you owe, rather than working to clear your loan and own the property outright. If you choose this option, it’s a good idea to consider when to switch back to a repayment mortgage.

  • Pay your mortgage off over a longer term: Remortgaging could prevent you from falling into future arrears by lowering your payments.

  • A payment holiday: You’ll be given up to a few months off your mortgage payments, but you’ll still accrue interest during this period.

  • The Breathing Space scheme: You may qualify for the government’s Debt Respite Scheme, which gives you 60 days free from fees, interest and the threat of eviction. It gives you time to put a plan together to tackle your arrears or find a new place to live if you’re at risk of repossession. 

How to deal with mortgage arrears

A mortgage is considered a priority debt, as the consequences for not paying it are serious, so it should be prioritised if your debts exceed your income. 

If you can’t pay the full monthly amount, pay as much as possible. 

It’s sensible to work with a debt counselling service or to seek advice from Citizens Advice or a charity like StepChange. 

They’ll help you set a realistic budget and navigate the arrears process to maximise your chances of getting on top of your debts and keeping your home.  

If you’ve taken out any insurance, such as mortgage payment protection, contact your provider to see if you’re eligible to claim. 

Generally, you’ll need to have been made redundant or be out of work due to illness to do so. 

Can I sell my house with mortgage arrears?

Yes – and it may be the best route if your mortgage has become unaffordable. 

If you’re in positive equity, selling your home will free up the money needed to clear your debt.

The situation becomes more complex if you’re in negative equity, as the sale may not fully clear your debt.  

Some lenders will agree to a process called an assisted voluntary sale (AVS). 

You'll typically be given time to sell your home while paying reduced mortgage payments, and the lender will cover legal fees.

Not all lenders will agree and may repossess your home to be sold at auction, but it's worth asking about. 

How long before mortgage arrears lead to repossession?

Repossession won’t be on the table unless you’ve missed at least three payments and aren’t willing to work with your lender. 

The legal process can take up to a year, and as we’ve said before, it’s treated as a last resort.  

Most UK lenders have signed the government mortgage charter, so they won’t generally evict you within a year of your first missed payment. 

If your lender starts the court process to repossess your home, they need to follow clear rules such as documenting your missed payments and how much is left on your mortgage.  

The repossession process can be intimidating, but it’s important to keep working with your lender and the court. 

It’s vital to attend your possession hearing.

The court may agree that you can stay in your home if you stick to certain payment terms (called a suspended order) or dismiss the repossession action altogether.  

How to reclaim unfair mortgage arrears fees

If you think your lender isn’t giving you a fair chance to resolve your arrears, you can make a complaint

For example, if your arrears are due to temporary illness, but you expect to return to full health and income, it may not be fair for your lender to apply arrears charges. 

You can claim via the Financial Ombudsman within three years of your arrears happening.  

Where to seek mortgage arrears advice

There are lots of places to seek free advice on mortgage arrears.  

  • Citizens Advice offers free advice on a wide range of consumer rights and debt issues, including any benefits you may be eligible to claim.

  • StepChange may be able to help if you’re struggling with mortgage arrears or have broader financial issues, StepChange can help you make a plan to get on top of your debts.

  • National Debtline offers advice on a wide range of debt issues, including mortgage arrears. 

  • Shelter may be able to help you understand your rights and process of repossession and eviction.

  • Your local council may be able to help house you if you can also show that your home is being repossessed due to unavoidable financial hardship.

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Unbiased Team
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.