Money Wellness
image of an illustrated house sitting on top of an open purse
category iconHousing
calendar icon19 Jun 2023

No plans for government to help with mortgage rises

Interest rates could hit 5.75% by the end of the year with another 0.25% hike due this week. But the government has said it has no plans to help households with the rising cost of mortgages.

Speaking to the journalist Laura Kuenssberg, MP Michael Gove said help for people struggling with their mortgages is being kept ‘under review’. But he added it was unlikely.

He said help similar to covid or energy bill schemes risked driving up interest rates even further.

Interest rates

Mortgage rates have been climbing as the Bank of England puts up interest rates to try to control inflation.

It means people remortgaging face sharp increases in their repayments. People looking to take their first step onto the property ladder are also having their buying squeezed.

According to new figures from Moneyfacts, a person fixing a £250,00 mortgage for five years in 2018 would have paid £1,175 per month at a rate of 2.92%. Today the average rate is 5.62%, taking monthly repayments to £1,553.

That’s an extra £378 per month at a time when families are also having to soak up broader cost of living pressures.

What happens if you miss a mortgage repayment?

If you miss two or more monthly mortgage repayments, you’re officially in arrears.

Your lender must make reasonable attempts to reach an agreement with you.

It’s crucial that you contact your lender if you’re struggling – the earlier the better. Don’t bury your head in the sand. Mortgage lenders are used to advising people who can’t afford repayments and have trained staff on hand to help.

What must your lender do?

Within 15 working days of falling into arrears, your lender must:

  • tell you how much your arrears add up to
  • list the missed payments
  • say how much is outstanding on your mortgage
  • state any additional charges that have been added to the amount you owe

Your lender must then consider any suggestions you make that could help you get back on track e.g. making lower payments for a while. They may also look at:

  • switching you to an interest-only mortgage
  • extending the term of your mortgage
  • giving you a payment holiday
  • helping you to sell your home so that you can repay your mortgage
  • the government support available to help you pay your mortgage

Missed or reduced mortgage payments may be recorded on your credit file. This may make it harder for you to borrow.

Could I lose my home?

You may decide to sell your home if you can’t afford to make the repayments owed. In extreme circumstances, your lender could take court action to repossess it.

Repossessions are far rarer than they used to be.

There are lots of steps a lender needs to take before repossession. The whole process usually takes around two years.

If you’re struggling with your mortgage payments, get in touch with us for free independent debt help.

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

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