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Mortgage arrears
What to do if you can't pay your mortgage
Updated 12 January 2023
If you're a homeowner, it's often not the bricks and mortar that keeps the roof over your head, but your ability to repay the mortgage. Yet recent interest rate rises mean more will struggle to meet monthly payments. This guide looks at the steps to take if you're finding it difficult, including help available.
Looking for more mortgage and debt help?
We've got lots of other helpful guides:
- Remortgage guide. Free guide which has tips on when remortgaging’s right, plus how to grab top deals.
- Should you remortgage? What to ask yourself before remortgaging.
- Debt help. Including where to get free advice.
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What being in 'mortgage arrears' means
If you've missed mortgage repayments and have payments overdue (even if it's just one), you're 'in arrears'.
Being in arrears might sound like a scary term you'd rather not think about. But with interest rates on mortgages at their highest in years and more people finding it tough to meet their monthly repayments, it's better to understand the steps you need to take, rather than ignore it and hope it goes away.
Those in the middle of switching mortgage deals are having to move on to rates of at least 4.5% and often much higher – vastly more expensive than what many were used to paying. This means mortgages are costing people £100s – or possibly even £1,000s – more each month. The wider cost-of-living crisis has also meant incomes are squeezed elsewhere.
Yet falling into mortgage arrears should be something you must try to avoid if at all possible, as the repercussions are serious. At the very least, your credit report will be damaged, at worst you risk losing your home entirely...
This guide talks you through how you can protect yourself:
- Not in arrears (but worried about the possibility)? Read about how to avoid arrears, including budgeting and taking out insurance.
- Already in arrears? You need to act immediately. See our urgent arrears help, which includes details of government support.
- Facing repossession? See how to prevent it happening and know your repossession rights.
How to avoid falling into mortgage arrears
Payment shocks – where the amount of money you earn falls, or the amount of money you need to cover bills jumps – can hit even the most financially-organised people. With interest rates on mortgages at their highest in years, many are experiencing a payment shock in relation to their home loan.
But there are steps you can take to lessen the impact of this:
Do a budget NOW
A budget isn't just for those struggling to get by – taking the time to do one is the first step anyone should take when organising their money. That way, you can see if there is any spare cash and, if possible, squirrel it away to act as a buffer when times get tight. Use our free Budget planner to help you.
If you're already feeling the squeeze, a budget becomes even more important. Go through all of your outgoings with a fine-tooth comb, and use our Money makeover guide to trim your costs down as low as possible. You'll then be able to see if it's possible to meet your vital bills, like your mortgage, or if you need to take more drastic measures.
Check your benefits entitlement
Losing your job is a common reason for falling into mortgage arrears. If you're in this position, soften the blow by signing on straightaway at your local Jobcentre while you look for work.
But even if your employment status hasn't changed, if you're struggling financially it's worth checking if you're one of millions missing out on government support. Some with a household income as high as £50,000 could still qualify for universal credit, for example (we're not saying you'll get it with income that high, just that it's worth checking, especially if you've kids).
See our 10-minute Benefits Checker guide to check if you're eligible for help.
Consider taking out insurance
If you're worried about losing your job, or want to protect your payments in the event of being in an accident or falling sick, there are several different kinds of insurance you can get to protect your mortgage. But if you already know your job's at risk, or you're already ill – you won't be able to get insurance.
What sort of policy you go for depends on what risks there are in your life. It's also based on whether you have dependants who'd still need to live in the house and pay for it if you were no longer around or no longer earning.
- Mortgage payment protection insurance (MPPI). The simplest product is MPPI. It's an insurance policy which promises to make the mortgage repayments for you if you can't work due to accident, sickness and sometimes unemployment (as a result of redundancy, it's not going to pay out if you simply decide to resign without another job).
However, if you're already struggling to pay or are already in arrears, you might not be able to get MPPI. Even if you can, it only pays out if you're unable to work through accident or illness, or if you're made redundant. If you're in work but still struggling, it won't help.
- Other forms of insurance. Other alternatives are accident, sickness and unemployment policies, which pay out a pre-agreed amount that is based on your earnings, not your mortgage, for up to two years. Or the more comprehensive income protection insurance, which pays out a pre-agreed amount based on your income in the event of accident or sickness until you either return to work or reach retirement.
Do bear in mind there's no legal requirement to insure your mortgage payments. Mortgage lenders often use the hard sell – throwing "peace of mind" and "lose your home" in the same sentence makes for a great sales pitch.
Nevertheless, MPPI's a good idea for many people. Yet DON'T automatically buy from your lender, as similar levels of cover can often be obtained for less than half the price through a standalone specialist insurer
Ask your lender what support it offers
If you foresee that meeting your repayments will become a problem, and you don't have any form of mortgage payment insurance, speak to your lender. Some options it might offer include:
- Switching temporarily to an interest-only mortgage. Here you are no longer paying off the actual loan itself, just the interest that's accruing. This could drastically reduce the amount you pay each month, depending on how far into the mortgage you are.
If you're in the early years, it will make a small difference, but the closer you are towards the end of the mortgage term, the bigger the impact. As this will cost you more interest in the long term, you should switch back to capital repayment as soon as you're able to.
- Taking a break from repayments. Here your payments will reduce to zero for a limited time. Yet interest will continue to compound on your outstanding balance.
- Extending the term of your mortgage. By lengthening the term – from 25 to 30 years, for example – you spread the debt over a longer period, reducing the amount that needs repaying each month. Over the long run you'll pay more interest, so once you can cover the old level of repayments, try to reduce the term again.
These options can help in times of financial hardship, but always remember they'll add to the cost of the mortgage over the entire term, so if possible, switch back when you can.
Here's a table outlining the kind of support some major mortgage lenders offer:
What payment support does my lender offer? (1)
| Lender | Type of support |
| Barclays | 'Tailored' support |
| Clydesdale Bank | Payment holidays (up to six months); extend mortgage term; interest-only; borrow back overpaid funds |
| Co-op Bank | Payment holidays; interest-only; reduced payments; extend mortgage term |
| Leeds Building Society | No fees on missed repayments (temporary); reduced payments; interest-only; extend mortgage term |
| Metro Bank | 'Tailored' support |
| Nationwide | Interest-only; reduced payments; payment holidays |
| Natwest | 'Tailored' support |
| Santander | 'Tailored' support |
| Virgin Money | Payment holidays (up to three months); extend mortgage term; interest-only; borrow back overpaid funds |
| Yorkshire Bank | Payment holidays (up to six months); extend mortgage term; interest-only |
| Yorkshire Building Society | New payment plans, such as interest-only |
(1) Correct as of October 2022
Step-by-step help if you're already in arrears
If you've already fallen into mortgage arrears, you need to take URGENT action. Follow these steps:
Step 1: Speak to your lender immediately
If you've not done so already, the most important step is to talk to your bank.
NEVER miss a repayment without first talking to your lender. It has far less impact if you've agreed a missed repayment or warned the lender that it's happening. Missing one without informing your lender triggers the 'arrears' issue immediately and starts the clock towards repossession.
Informing your lender in good time will hopefully leave you in the most likely position to be offered a range of possible solutions (see above for what help lenders might offer). If you wait for your lender to get in touch with you, there's a chance you might not have access to the same range of help.
Important. Every missed mortgage payment not approved by your lender will appear as default on your credit report (missed or late repayments can stay on your report for six years).
Step 2: Claim on any insurance you've got
If you've got any form of mortgage insurance, such as Mortgage Payment Protection Insurance (MPPI) or an accident, sickness and unemployment policy, now is the time to start claiming on it.
You'll need to get in touch with your insurance provider immediately. Where you're unable to cover your mortgage payments because you're unemployed, you'll likely have to prove to your provider that you're looking for work (or if it's illness-related, provide a doctor's certification).
The amount of MPPI you'll be paid will have been agreed upon when you first took out the policy (so check the paperwork if you're unsure). Typically a policy like MPPI covers your mortgage costs for up to one or two years.
Step 3: Check if you're eligible for government support
Some people on benefits are eligible for government help with their mortgage payments. This is known as support for mortgage interest (SMI), which'll pay the some of your mortgage interest for you. It's paid to your lender, but for you it's in the form of a loan, which you'll eventually need to pay back.
Where you're eligible for SMI...
- The Government will cover some of your interest payments for the time you can't afford them. SMI covers interest on the first £200,000 of your outstanding mortgage (£100,000 if you're getting pension credit).
- The level of interest is set by the Government. Currently it's set at 2.09%, though it'll change if the Bank of England average mortgage rate moves by at least 0.5% away from the SMI rate. This means as mortgage rates go up, the SMI rate will too, so you won't have to pay the shortfall. Similarly, it will go down if mortgage rates drop. Yet there's a lag, so it may not move up as quickly as your mortgage rate does.
Who's eligible for SMI?
To get SMI, you need to be receiving income support, income-based jobseeker's allowance (JSA), income-based employment and support allowance (ESA), universal credit or pension credit. Full details are on the Gov.uk website, but in brief:
- Income support, JSA or ESA. You'll need to have been receiving one of these for at least 39 weeks in a row before you can claim SMI.
- Universal credit. Under the current rules, you'll need to have claimed the benefit for nine months before receiving SMI (this is due to change in spring 2023). You won't be eligible if you're a UC recipient who gets certain income.
- Pension credit. You can claim SMI from the date you start getting pension credit.
So, if you've recently lost your job or had an income cut, it's important you sign on at your local Jobcentre to get benefits, or the Pensions Office to get pension credit, otherwise you won't be eligible for SMI.
Your eligibility will automatically be assessed when you apply for one of these income-related benefits. If you already get one of these benefits and you're living in England, Scotland or Wales, you can find further details about applying for SMI on the Gov.uk website, while the application process is slightly different in Northern Ireland.
Do note that you can't claim if you've more than £16,000 in savings, or if you own more than one residential property.
SMI is paid to you as a loan
SMI used to be paid as a benefit. These days it comes in the form of a loan.
This means you'll have to pay back the amount the state paid into your mortgage for you when you sell the house or pass the ownership to someone else. These loans will also attract interest and (currently the rate is 3.03%) and interest will compound because you're not paying it back.
What happens when I start work again?
SMI stops paying out once your benefits stop – it's usually when you return to work, or start working extra hours to earn more. However, you may be able to claim mortgage interest run on (MIRO) to help you make the transition.
MIRO lasts for four weeks, and will be the same amount that SMI paid, but the big difference is MIRO is paid to you, instead of to your lender. Check if you're eligible at Gov.uk.
Step 4: In Scotland extra mortgage help is available for some
The Scottish Government provide extra help for homeowners to keep their homes. If you're at risk of having your home repossessed, the Scottish Government's Home Owners' Support Fund may be able to help you.
It's made up of two schemes:
- Mortgage to Shared Equity. The Scottish Government buys a stake in your property so you can reduce your secured loan(s).
- Mortgage to Rent. This allows a social landlord to buy your home, and you'll continue to live there as a tenant.
Find out more about the Home Owners' Support Fund.
Your repossession rights
If you're struggling to meet repayments, don't have any mortgage insurance or savings, and aren't eligible for any state help, then you need to be aware of your repossession rights.
Before you do that, look deep into your finances to see whether you can free up cash elsewhere – see the chapter on how to avoid falling behind.
What repossession means
A mortgage is a loan secured on your home. That means if you can't repay, the lender has a right to take your home instead. Repossession is when it puts this right into practice, by going to court and taking the house.
Lenders must use repossession only as a final resort, and there's an agreement that the major lenders won't commence repossession proceedings until at least three months of arrears have occurred and you've been referred to independent debt advice. It's worth remembering that most lenders don't want to repossess, they'd prefer you to repay, and the regulator expects them to work with you to try to make that happen.
However, if it looks inevitable that you can't afford it, or you don't communicate with your lender, the lender will take steps to repossess your home.
It'll often put your home up for auction to get a quick sale, which doesn't necessarily mean the best price. Sadly, even that isn't necessarily the end of it – if the sale doesn't cover what you owe, it can still chase you for the cash. For this reason, if in the long run repossession is inevitable...
Consider selling the home yourself – you'll probably get a higher price
That way, if you're going to lose your home, you'll be in control of it, may be able to hold off for a better deal, and may come out the other end with some cash. Plus you won't have a repossession registered against you, which will severely affect your chances of getting a mortgage in the future.
We've got a whole guide on How to sell your property.
How to prevent repossession
Crucially, banks shouldn't start repossession proceedings while a settlement is being actively negotiated. The key word here is 'actively'. Talk to your lender about alternative options that will lower the amount of money you need to pay each month. See the chapter on Avoiding mortgage arrears for more details about the possibilities.
If your bank's writing to you, and you're hiding the letters, it can argue no negotiations are taking place, and so can start repossession.
2. Seek debt help
If you're struggling, you should also take a look at all your debts together, and try to manage and prioritise them. See our Debt help guide for a full checklist on how to do this.
If you have problems with your lender, then using one of the non-profit debt counselling agencies also adds real weight. And if it ever goes to court, then it is very helpful in proving you've been 'actively' trying to sort it out, which could prevent a court from issuing a repossession.
The main agencies are...
Citizens Advice
Full debt and consumer advice service. Many bureaux have specialist caseworkers to deal with any type of debt, including repossessions and negotiation with creditors. Find your nearest Citizens Advice centre or chat online with an adviser.
- Tel: 03444 111 444 (option 3)
- Opening times: Different for each bureau, so check your local branch for its hours, though they're all closed on bank holidays.
- Web chat: Monday to Friday, 8am and 7pm (except bank holidays)
Advice NI offers a similar service for those in Northern Ireland.
StepChange Debt Charity
A full debt help service is available across the UK. Online support is also available via its debt advice tool where you can create a budget and get a personal action plan with practical next steps. You can also ask a StepChange adviser a question on our dedicated MSE Forum page.
- Tel: 0800 138 1111
- Opening times: Monday to Friday, 8am to 8pm, Saturday, 8am to 4pm (closed on Sundays and bank holidays)
National Debtline
National Debtline provides free advice and resources to help people deal with their debts. Advice is available over the phone, online and via webchat.
- Tel: 0808 808 4000
- Opening times: Monday to Friday, 9am to 8pm, Saturday, 9.30am to 1pm
When mental health problems are involved, some special solutions apply. Our free
Mental Health & Debt Help PDF booklet has tips and advice on how to handle debts when stressed, working with banks and getting free one-to-one debt counselling. It also covers specific tips for those with a range of mental health issues, like bipolar and depression sufferers.
3. Try to pay something
Negotiating with your lender can involve asking to move your payment date, or suggesting a smaller monthly payment for a specified period. It should listen to these, and make suggestions of its own.
In the first instance though, talk it through first with the debt counsellors, so you know the best thing to ask for from your lender.
If repossession's already happening
This really is worst case scenario time, but it's important to know what would happen if the repossession went through. If your home is successfully repossessed, your lender will sell it to get the money to repay the debt.
Where repossession is actually happening...
- Don't try to fight repossession on your own. As it's a legal issue you'll need legal advice as soon as possible. The Housing Possession Court Duty Scheme can help you – to access it, contact your local council, or the court where your case is being heard.
- Check if you can get help with legal costs. If you are required to go to court, check if you can access legal aid to help with the cost.
- Always go to court hearings. A judge is much more likely to rule in your favour and give you longer to sort the problems out if you show you're serious and turn up.
If you have any questions about court or legal issues, one of the debt help agencies should be able to provide information.
Where your home ultimately sells for less than you owe, your lender may want you to cover the unpaid debt, known as the mortgage shortfall. This is no longer a 'priority debt', so it can't take your possessions to pay it off.
However the lender can pursue you for the shortfall for up to 12 years, and six years for any interest. There's a helpful factsheet on the National Debtline website with more information.
Looking for more mortgage and debt help?
- Should you remortgage? What to ask yourself before remortgaging.
- Debt help. Including where to get free advice.
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