Pandemic Repossessions

According to a report by a leading think-tank, nearly 800,000 residential mortgage borrowers might be at particular risk of losing their home. This vulnerability has arisen for owner-occupiers and their families who have seen their savings dwindle during the Coronavirus pandemic. Worryingly, one in ten of the mortgage customers surveyed said they did not have sufficient reserves to meet even a single month’s repayment.

Entitled ‘Safe as Houses’, the Building Societies Association (BSA) funded the independent report. Its author, the Social Market Foundation (SMF), is a cross-party think tank based in Westminster that focuses on British political policy. Founded in 1989, it once received a nomination as one of the top twelve such organisations in the UK.

According to its unsettling findings, some 770,000 households are currently at increased risk of possession proceedings by their bank, building society or other home loan provider. Of this total, more than a quarter (26 per cent) involves homeowners who work in manufacturing or retail. Both of these hard-hit sectors have experienced layoffs and rising unemployment following COVID-19 lockdowns.

Alarmingly, mortgage repayment deferrals look set to discontinue after 31st July 2021. In the meantime, the FCA had agreed on a suspension of repossession executions by mortgage lenders until 31st March. Fortunately for hard-pressed borrowers, that deadline will now move to the end of May 2021 for homeowners of good standing.

SMF stated that in its view, the post-pandemic economic effects and other pressures looming on the horizon were unlikely to ease off soon. The potentially precarious situation should act as a wake-up call to ministers, it considered. Their report concluded that more substantial financial support was necessary for those homeowners experiencing difficulty or at risk of repossession of their property.

Decreased savings

Notably, while overall savings had increased during the pandemic, workers in insecure jobs or on low incomes had suffered the reverse. In February 2021, a survey of some 2,000 mortgage account customers found that nearly three in ten (29 per cent) had seen their personal savings balances fall.

Ominously, the government SMI (Support for Mortgage Interest) scheme will soon change from a grant-based system to loans. Additionally, it will be available only to unemployed mortgage payers, i.e. no longer payable to those homeowners who manage to retain part-time hours of work.

With the above in mind, the SMF favoured introducing a hardship grant similar to that approved in the US under the new Biden presidency. The foundation saw it as a more effective means of protecting households from falling further into arrears or taking on burdensome extra loans at unfavourably high interest rates. Also, the report supported a wider uptake of mortgage payment protection insurance to ensure a balance between private and public support for homeowners.

A spokesman for the SMF, Scott Corfe, pointed out that the government would need to prepare for a potential spike in mortgage repossessions and evictions from rented properties. For these reasons, he advocated a broader, long-term reform of the existing SMI scheme.

Also, other experts have pointed to Australia. There, individuals who have private pension funds can access them early, in times of severe financial distress.

Calls for debate

On a similar note, Paul Broadhead, spokesman for the BSA, spoke about wealth and income inequality following the pandemic, which first hit in March 2019. He called for urgent attention to help struggling homeowners, to complement existing lender forbearance.

While Mr Broadhead recognised that there was no single solution that would suit all borrowers, he emphasised the need for all stakeholders to participate – including the government. Concerned by events, he hoped hard-pressed owner-occupiers would overcome their temporary or longer-lasting difficulties and enjoy living in financially sustainable homes.

Finally, the BSA spokesman called for a renewed debate to create positive futures for individuals and families for whom the current outlook seemed rather bleak. Nationally, the association represents all forty-three UK building societies, as well as six credit unions.

Contact us if you require expert advice and need to stop repossession of your home.