Figures published last week showed that house prices have risen slowly again and mortgages granted to first-time buyers rose for the third month in a row.
But the recovery has not been sufficient to lift many families out of negative equity, causing one housing expert to say the number of repossessed homes may top the numbers seen in the last housing slump. But home owners can take steps to avoid losing the roof over their heads.
1. Build a safety net
Build a financial cushion to protect against shocks. Advisers recommend enough cash to tide you over for three to six months. Keep it in an easy-access savings account.
2. Look at insurance
Unemployment insurance is an option. This cover, often bundled with accident or sickness insurance, normally pays a fixed monthly income, which is set at the outset. It is typically two-thirds of your take-home pay, although you can buy policies that cover just the monthly mortgage.
There is often a delay of one, two or three months before you receive the first payment – the longer this “deferment” period, the cheaper the policy, and payments are made for the maximum of a year.
This insurance is not generally available to people who are self-employed, work on contracts, or for a company that has already announced a redundancy programme.
3. Don’t ignore problems
TO avoid repossession, take action the moment you realise there is a problem, or could be one, advisers say. Even if you have not missed a payment it is worth contacting a lender if you think this is likely in the next few months.
Lenders have agreed to deal with arrears “sympathetically and positively”, so they should help you to come to an arrangement that lowers monthly mortgage payments temporarily.
Two options are to increase the term of the mortgage or switch it to an interest-only loan, both cut monthly repayments in the short term. Also look at other costs and pay those items where non-payment has the most serious consequences.
4. Don’t panic
According to Shelter, it takes about nine months between running into problems and being evicted (unless you have a subprime mortgage, where the lenders can be quicker to repossess).
“Your lender will contact you if you miss one mortgage payment, but most of the major lenders won’t get a court summons until you are six months in arrears,” the charity said. “It is during this time that Shelter feels it is vital to talk to your lender and seek independent advice, so that you can negotiate with your lender and hopefully avoid going to court.”
If these negotiations are unsuccessful, or if you ignore letters and calls from a lender, you will receive a summons. This will be sent at least 21 days before a hearing. If the lender is granted an outright possession order you have 28 days to vacate.
5. Get advice...
Several charities offer free debt advice, including Citizens Advice, National Debtline (www.national debtline.co.uk) and the Consumer Credit Counselling Service (www.cccs.co.uk). Or seek free expert advice from Shelter’s Homeowner helpline (0300 3300 515) or visit www.shelter.org.uk.
6. … but don’t pay for it
Shelter advises home owners to avoid firms that charge a fee for advice, as this can only add to debt. Use the groups mentioned instead.
7. Be wary of more debt
Don’t borrow elsewhere to pay off mortgage arrears, it will lead to further debt.
8. Get state help
The Government has instituted measures to help keep people in their homes.
Support for Mortgage Interest (SMI) is designed to meet mortgage interest payments on sums up to £200,000. Interest is paid at a fixed rate, now 6.08pc.
The scheme covers people who have lost their jobs and claim means-tested benefits, such as income support, jobseekers’ allowance and employment and support allowance. You can claim after 13 weeks.
However, SMI covers only homes with a single person responsible for the mortgage, or where a couple have both lost jobs.
The Home owners’ Mortgage Support (HMS) scheme will allow borrowers to defer interest payments for up to two years, if they lose their job. It is currently being finalised between the Government and mortgage lenders, and will only be available to those who still have some regular household income and can meet 30pc of their interest payments.
The Mortgage Rescue Scheme is a package of measures aimed at the most vulnerable families. It involves either shared equity or converting a mortgage to a rental agreement instead.
9. See a court adviser
It is almost never too late to try to come to an agreement with your lender. There are government-funded court desks providing free legal representation at repossession hearings in nearly all county courts.
These have prevented immediate repossession in up to 85pc of cases when people attend court, according to the Department for Communities & Local Government
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