What Are Mortgage Arrears?
When you fall behind on your mortgage payments, the unpaid amounts are known as mortgage arrears. Simply put, mortgage arrears are the total of any missed payments you owe to your lender, plus any interest or charges that may have built up as a result. Being in mortgage arrears means you have not kept up with the agreed schedule for paying back your mortgage, and your account is now in debt.
Mortgage arrears can happen for many reasons. Common causes include sudden changes in your circumstances, such as losing your job, a drop in income, illness, relationship breakdown, or unexpected expenses. Even a single missed payment can quickly lead to arrears if the situation isn’t addressed early on.
It’s important to understand the difference between a missed payment and being in arrears. Missing one payment means you have not paid on time for that month, but your lender may give you a short period to catch up. However, if you continue to miss payments, the amount you owe increases, and you are officially in mortgage arrears. This is a specific type of debt arrears that can have serious consequences if not dealt with promptly.
Addressing mortgage arrears as soon as possible is crucial. If you ignore the problem, the situation can quickly escalate. Lenders have legal rights to take action, which may include starting the repossession process to recover the property. However, you do have rights and options. The Consumer Credit Act 1974 sets out important protections for borrowers, including how lenders must treat you if you fall behind and the steps they must follow before taking any legal action.
If you are struggling with mortgage arrears, don’t wait for the problem to worsen. Speak to your lender, seek advice, and explore your options as soon as possible. Early action can help you avoid more serious consequences and may make it possible to keep your home.
Your Rights When Facing Mortgage Arrears
When you fall behind on your mortgage payments in the UK, you have important legal rights and protections. Understanding these rights can help you take control of the situation, communicate effectively with your lender, and avoid unnecessary stress or the risk of losing your home.
Legal Protections for Borrowers
UK law provides safeguards for people in mortgage arrears. Lenders must follow strict rules before they can take any enforcement action, such as repossessing your home. These rules are set out in the Financial Conduct Authority’s (FCA) Mortgage Conduct of Business rules and, for some types of secured loans, the Consumer Credit Act 1974. These regulations ensure that you are treated fairly and given a reasonable chance to resolve the arrears.
What Lenders Must Do Before Taking Action
If you miss one or more mortgage payments, your lender cannot immediately start legal proceedings. They are required to:
- Contact you early: Your lender must get in touch as soon as you miss a payment to discuss your circumstances and options.
- Provide clear information: You should receive details about the amount you owe, any charges or interest added, and what will happen if arrears continue.
- Consider your situation: Lenders must take your individual circumstances into account and explore ways to help you manage your arrears. This could include agreeing to a new payment plan or giving you time to seek debt advice.
- Follow pre-action protocols: Before starting court proceedings, lenders must follow a set of steps known as the ‘pre-action protocol’. This is designed to encourage communication and avoid unnecessary legal action.
You can read more about your rights when in debt arrears, including mortgages, to understand the wider protections available.
Your Right to Clear Information and Fair Treatment
You have the right to be treated fairly and to receive information that is easy to understand. Lenders must not pressure you into making payments you cannot afford or mislead you about your options. If you feel your lender is not treating you fairly, or if you cannot reach an agreement, you can make a complaint to the Financial Ombudsman Service. This independent service helps resolve disputes between consumers and financial firms.
Communicating With Your Lender
It’s important to talk to your lender as soon as you have difficulty making payments. Here’s what you can expect and how to approach the conversation:
- Be honest about your situation: Explain why you are struggling and provide any evidence, such as changes in income or unexpected expenses.
- Ask about your options: Lenders may offer short-term payment holidays, reduced payments, or changes to your mortgage terms.
- Keep records: Always keep copies of letters, emails, and notes from phone calls.
- Seek advice: If you’re unsure what to say or do, consider getting free, independent advice from a debt charity.
Remember, your lender is required to work with you to find a reasonable solution. If you disagree with their approach or feel your rights are not being respected, the Financial Ombudsman Service can review your case.
For more details on your legal protections as a borrower, including which types of debts are covered, see the Consumer Credit Act 1974.
Understanding your rights and communicating clearly with your lender are key steps to resolving mortgage arrears and protecting your home.
How Mortgage Lenders May Respond to Arrears
When you fall behind on your mortgage payments, your lender is required to follow certain steps before taking any further action. Understanding how lenders typically respond to mortgage arrears can help you make informed decisions and potentially avoid losing your home.
Initial Contact and Reminders
Most lenders will contact you soon after you miss a payment. This usually starts with a reminder letter, email, or phone call. The aim is to alert you to the missed payment and encourage you to bring your account up to date. Lenders are required by the Financial Conduct Authority (FCA) rules to treat customers in arrears fairly and to consider your individual circumstances.
Repayment Plans and Forbearance
If you are struggling to pay, lenders may offer options to help you manage the arrears. This could include:
- Repayment plans: Agreeing to pay off the missed payments in instalments over a period of time, alongside your usual monthly payment.
- Forbearance: Temporary measures such as reducing or suspending payments, extending the term of your mortgage, or switching to interest-only payments for a short period.
The FCA’s Mortgages and Home Finance: Conduct of Business sourcebook (MCOB) sets out that lenders must consider reasonable requests for alternative arrangements and should not take possession action unless all other reasonable attempts to resolve the situation have failed.
Escalation to Legal Action
If arrears continue and you are unable to reach an agreement with your lender, they may start legal proceedings. This is often called “mortgage possession action.” Before taking this step, lenders must follow the Pre-Action Protocol for Possession Claims, which requires them to give you clear information, consider any proposals you make, and try to resolve the matter without going to court.
Court Involvement and Possession Proceedings
If your lender applies to court for a possession order, you will receive legal documents and a hearing date. The court will consider your circumstances and whether the lender has followed all required procedures. You have the right to attend the hearing and explain your situation. The court can:
- Dismiss the case if the lender has not followed the rules
- Make a suspended possession order, allowing you to stay in your home if you keep to a new payment plan
- Grant outright possession to the lender, which could lead to eviction
The Importance of Early Engagement
It is vital to contact your lender as soon as you know you might have trouble making your payments. Early communication gives you the best chance to agree on a solution and avoid escalation to legal action or repossession. Even if legal proceedings have started, it is not too late to seek help and negotiate with your lender or ask the court for more time.
Remember, the law requires lenders to treat you fairly and to consider reasonable ways to help you stay in your home wherever possible. Taking action early greatly increases your options and can help protect your home.
Options to Manage and Resolve Mortgage Arrears
When you fall behind on your mortgage payments, it’s important to know that there are several ways to address the situation and reduce the risk of losing your home. Taking action early and exploring your options can make a significant difference.
Repayment Plans
Many lenders are willing to discuss a repayment plan if you’re in arrears. This usually involves agreeing to pay your usual monthly payment plus an extra amount towards the arrears, spread over a period you can afford. The exact terms will depend on your circumstances and what you can realistically pay. Lenders are required under the Financial Conduct Authority (FCA) rules to treat customers fairly and consider reasonable proposals to clear arrears.
Payment Holidays and Reduced Payments
If your financial difficulties are temporary – for example, due to illness or job loss – you might be able to arrange a short-term payment holiday or reduced payments. This means you can either pause or lower your payments for an agreed period. However, interest will usually continue to build up, and you’ll need to catch up on missed payments later. Always check with your lender about the impact on your credit file and future repayments.
Mortgage Restructuring
If your current mortgage is no longer affordable, restructuring your mortgage could be an option. This might involve extending the term of your mortgage to reduce monthly payments, switching to an interest-only mortgage for a period, or even remortgaging to a product with a lower interest rate. Your lender can explain what options are available and the implications of each.
Financial Assistance: Support for Mortgage Interest (SMI)
If you’re claiming certain benefits, you may be eligible for government help with your mortgage interest through Support for Mortgage Interest (SMI). SMI is a government loan that helps pay the interest on your mortgage (but not the amount you borrowed) if you’re on qualifying benefits. To learn more about how SMI works, who qualifies, and how to apply, see our detailed guide on Support for Mortgage Interest (SMI): Who Qualifies and How to Apply.
Negotiating with Your Lender
Open and honest communication with your lender is crucial. As soon as you know you might miss a payment, contact your lender to explain your situation. Lenders are required to consider any reasonable request to change the way you pay your mortgage, and they must follow the FCA’s Mortgage Conduct of Business rules, which encourage them to work with you to find a suitable solution. Be prepared to provide details about your income, outgoings, and any changes in your circumstances.
Seeking Professional Debt Advice
If you’re struggling to manage your mortgage arrears or other debts, it’s a good idea to seek professional advice. Free and confidential debt advice services can help you understand your options, negotiate with your lender on your behalf, and create a plan to get back on track. For more information on dealing with debt, visit our managing debt page.
Taking action early and exploring all available options can help you manage mortgage arrears and protect your home. Don’t wait until the situation becomes urgent – reach out for support and discuss your situation with your lender or a qualified adviser as soon as possible.
Additional Support and Related Issues
Falling behind on your mortgage payments can often be linked to wider financial challenges. It’s common for people facing mortgage arrears to also have other types of debt or experience changes in their personal circumstances that make managing payments more difficult. Understanding the bigger picture can help you find the right support and avoid further problems.
Other Types of Arrears
If you’re struggling with mortgage payments, you may also be dealing with rent arrears or tax arrears. While each type of arrear has its own legal process, the stress and consequences can be similar – such as the risk of losing your home or facing legal action. It’s important to prioritise your debts, with mortgage or rent payments usually being the most urgent, as these directly affect your housing situation. If you have multiple arrears, consider seeking advice on how to manage them together to avoid escalating problems.
Impact of Redundancy or Job Loss
Redundancy or losing your job is a common reason people fall into mortgage arrears. If your income suddenly drops, it can be difficult to keep up with regular payments. UK law requires mortgage lenders to treat you fairly and consider any proposals you make to pay back what you owe. If you’re facing redundancy, it’s vital to understand your rights and what support is available. Our guide on redundancy support explains your entitlements, how to claim benefits, and steps you can take to protect your home.
Housing Assistance Options
If you’re at risk of losing your home because of mortgage arrears, you may be eligible for housing assistance from your local council or government schemes. This can include emergency accommodation, help with rent or mortgage interest, or advice on finding alternative housing. The law (such as the Housing Act 1996 in England and Wales) sets out the duties of local authorities to help people who are homeless or threatened with homelessness. Acting early can increase your options and help you avoid eviction or repossession.
Financial Issues Linked to Divorce
Major life changes like divorce can have a significant impact on your finances, including your ability to pay the mortgage. Divorce settlements may involve pension sharing, which can affect your long-term financial security and how you manage mortgage arrears. The law allows for pensions and property to be divided between partners, and the outcome can influence who is responsible for mortgage payments or who remains in the home. It’s important to seek legal advice to understand your rights and make informed decisions during this process.
If you are facing mortgage arrears, remember you are not alone. Exploring these related issues and seeking support early can make a big difference in resolving your situation and protecting your home.
