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Mortgage arrears
What to do if you're behind on your mortgage payments
Updated 19 September 2023
If you're a homeowner, it's not just the bricks and mortar that keeps the roof over your head, but your ability to repay the mortgage. Falling behind on mortgage repayments means you're in arrears – something that puts you at risk of losing your home (known as 'repossession'). This guide looks at the urgent steps you need to take if you're in arrears.
Not yet in arrears but worried about it?
This guide is aimed at homeowners who are already in mortgage arrears. If you're not, but are struggling with your repayments – or are worried you might soon be – there's new help available. See Struggling to pay your mortgage.
What does being in 'mortgage arrears' mean?
If you've missed a mortgage repayment, you risk falling into 'mortgage arrears' – a build-up of overdue payments.
It might sound like a scary term you'd rather not think about, but it's a serious situation which should not be ignored. The problem won't just magic itself away.
At the very least, being in mortgage arrears can seriously impact your credit file, something which could potentially affect your future ability to borrow. At worst, persistent arrears could result in you losing your home – in other words, repossession (which we cover below).
With interest rates on mortgages currently at their highest in years – the impact of which is being compounded by the cost-of-living crisis – the prospect of falling into mortgage arrears is sadly affecting more and more people. In fact, the Bank of England recently claimed that the value of UK mortgages in arrears was at a seven-year high.
If you're not yet in arrears but are either struggling to meet your repayments or are worried you will soon be, head over to our Struggling to pay guide.
For those already in mortgage arrears though, this is the guide for you. In short, you need to take urgent action. Read on for our step-by-step help...
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Step 1: Contact your mortgage lender NOW
Simply missing a mortgage repayment without notifying your lender risks triggering the 'arrears' issue and starting the clock towards repossession.
So if you've missed one or more repayments and not yet contacted your lender – particularly if you think it's likely you're going to miss another one – then reaching out is an urgent priority.
Furthermore, each overdue mortgage payment not arranged with your lender can have a seriously detrimental impact on your credit report – late payments, missed payments and defaults will stay on your credit file for up to six years and potentially harm your future ability to borrow.
Ask your lender what support it offers
The type of support a lender might offer you if you're struggling will normally depend on your particular circumstances and how much you're able to repay (you might need to provide your lender a breakdown of your incomings and outgoings in order to establish this).
For this reason, lenders typically refer to the kind of help they offer struggling homeowners as 'tailored support'. It could include:
- Reducing your repayments. Here your payments will be reduced from their normal monthly amount for a limited period of time.
- Taking a break from repayments. Here your payments will reduce to zero for a limited time.
- 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.
- 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.
While these options can help in the short term, be mindful that each of them will ultimately ADD to the cost of your mortgage over the longer term. So, as soon as it's manageable and appropriate, try to switch back to your normal level mortgage repayments.
Will accepting mortgage support impact my credit file?
If you're struggling with your mortgage, it's crucial to remember that simply reaching out to your lender to discuss the situation will NOT impact your credit file. Don't be hesitant to reach out.
Where you do go on to agree a form of mortgage support with your lender, this is the point at which your credit file might be affected. In other words, other lenders will be able to see from your file that you're on some form of payment plan with your mortgage.
Your mortgage lender should explain how any form of mortgage support it's offering you will be reflected on your credit file. Typically it will result in:
- An 'arrangement' marker being added to your credit file. This will likely be added where you've agreed to a short-term form of support, such as a temporary switch to interest-only or a payment reduction / holiday. This marker will be visible to other lenders, but will be removed when the arrangement comes to an end – although lenders will still be able to see that an arrangement was in place in the past (the effect of this should diminish as time passes).
- Arrears appearing on your credit file. Again, this will likely be the case with a temporary switch to interest-only or a payment reduction / holiday – essentially in any scenario where you're not making your full, contractual monthly repayments. Arrears will remain outstanding until you've repaid them, unless your lender agrees to add them to your mortgage loan (known as 'capitalisation').
Even once you've made up any arrears, missed, late and under/partial payments can stay on your credit file for up to six years. However the impact of this should lessen over time, as lenders will usually pay more attention to your more recent credit history.
Unfortunately, it's hard to say to what degree a mortgage arrangement or arrears could affect your future ability to borrow. Ultimately, much depends on the rest of your credit history (see our top tips on Boosting your credit score) and the particular lender you're applying to for credit.
What we can say, though, is that if you're in arrears it's better to be so whilst an arrangement with your lender is in place. This arrangement helps other lenders to understand what is happening, rather than leaving them in the dark about why arrears are or were accruing.
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. (Don't have insurance? Skip to step 3.)
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.
Be mindful that it might take some time – possibly weeks – before the insurance starts paying out.
What type of insurance do you have?
Here's a brief reminder of the types of insurance that are available in case you've forgotten what kind of policy you took out:
- Mortgage payment protection insurance (MPPI). This type of insurance is designed to temporarily cover your mortgage repayments 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). If you're in work but still struggling, it won't help.
- Accident, sickness and unemployment policies. These pay out a pre-agreed amount based on your earnings, not your mortgage, for up to two years.
- Income protection insurance (IP). This 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, so it could be the case that you don't have any insurance to cover your mortgage payments.
Step 3: Reassess your finances, check government support and benefits
If the support your lender can offer isn't enough to ensure you can meet your monthly mortgage repayments, you need to explore other ways to ease the financial pressure.
Even if the support you're getting from your lender has solved the problem with repaying your mortgage for now, it's still worth considering the following options so that you reduce the chance of falling into arrears again in future.
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 in mortgage arrears, it might be that you've already tried putting together a budget. If so, it's worth giving it another go in case the situation has changed since you last mapped out your incomings and outgoings.
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, it's worth checking you're not missing out on crucial benefits – millions of people in the UK are not claiming vital help they're entitled to.
Don't just assume you won't qualify. Some with household income as high as £50,000 could 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 and/or high rent).
See our 10-minute Benefits Checker guide to find out if you're eligible for help.
Government mortgage support is available for some
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 some of your mortgage interest for you. It's paid to your lender, in the form of a loan that you'll eventually need to pay back.
Here's how SMI works in brief:
- 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 2.65%, 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 received Universal Credit for three months before claiming SMI. You can make a claim even if you get income from a job (in other words, if you're receiving Universal Credit you don't have to be out of work to be eligible for SMI).
– 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, as soon as possible, 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.
SMI is provided like 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 3.28%) 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: Seek free debt help
If you're in mortgage arrears, it might be that you're struggling with other repayments and debts too. Where this is the case, you should 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're having problems with your mortgage lender because of mortgage arrears, then using a non-profit debt counselling agencies can add real weight. And if the lender ever goes to court in a bid to repossess your home, 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 order.
The main debt help 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 to issues around repossessions. Our free
Mental Health & Debt Help booklet has 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.
Step 5: Know your repossession rights
If you're continuing to struggle to meet your mortgage 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....
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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.
However, don't think that lenders are sitting there, licking their lips, waiting for the earliest opportunity to repossess your home. Far from it – repossession is NOT in a lender's interests, in fact it's normally a last resort for them. So don't let the fear of repossession stop you from keeping in contact with your lender.
In fact, there's an agreement that the major lenders won't repossess a home until at least 12 months after the first missed payment. Remember, 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 arrears continue to accrue and you don't make any effort to resolve the situation, the lender will eventually 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.
Final options 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.
If your lender is writing to you, and you're hiding the letters, it can argue no negotiations are taking place, and so can start repossession.
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 a debt counsellor, so you know the best thing to ask for from your lender.
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 – free legal help is available. As repossession is a legal issue, you'll need legal advice as soon as possible. But you don't need to pay for it. The Housing Loss Prevention Advice Service gives you access to Government-funded legal advice and representation from as soon as you receive written notice that repossession proceedings have started. To find your nearest provider, enter your postcode and tick the box for Housing Loss Prevent Advice Service here.
- 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.
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