Mortgage arrears repossession risk

Legal position:
In England and Wales, mortgage arrears can potentially lead to repossession proceedings by your lender, even if you are attempting to make reduced payments. However, repossession is not automatic and is generally considered a last resort. Under the Financial Conduct Authority's Mortgage Conduct of Business rules, lenders are required to treat customers fairly and must consider reasonable forbearance options, such as temporarily reduced payments, payment holidays, or extending the mortgage term, before pursuing possession. The Pre-Action Protocol for Possession Claims Based on Mortgage Arrears also mandates that lenders communicate with you, provide information on your arrears, and explore alternatives to repossession. A court will only grant a possession order if it is deemed reasonable in the circumstances, taking into account factors like your efforts to pay, your personal situation (e.g., health or employment issues), and whether the lender has followed the protocol. If arrears persist without an agreed arrangement, the lender may apply to court after giving notice, and you would have an opportunity to defend the claim.

Practical considerations:
Whether repossession occurs depends on several factors, including the terms of your mortgage contract, the level and duration of arrears (typically, lenders act after two or three months of missed payments), your communication with the lender, and any underlying reasons for the arrears. Attempting reduced payments shows good faith, but these must be formally agreed with the lender to avoid escalation; unilateral reduced payments may still count as arrears. Repossession involves costs and stress, and even if granted, the court may suspend the order if you can demonstrate a plan to clear arrears. Note that repossession can affect your credit rating and future borrowing. Recent economic pressures, such as those from the cost-of-living crisis, have led some lenders to offer more flexible forbearance, but this varies by provider.

Options and next steps:
It is often sensible to prioritise informal resolution over court action. Consider the following in order:

1. Contact your lender immediately to discuss your situation and propose a repayment plan, providing evidence of your income and expenses to support reduced payments.

2. If no agreement is reached, seek free advice from organisations like Citizens Advice, Shelter, or StepChange Debt Charity, who can help negotiate or assess eligibility for benefits or support schemes.

3. If the issue persists, you could explore formal complaints to the lender, escalating to the Financial Ombudsman Service if necessary, which is free and can resolve disputes without court.

4. As a last resort, if proceedings are issued, prepare a defence for court, potentially with legal aid if eligible, focusing on your repayment efforts.

This advice assumes your mortgage is regulated and relates to a residential property in England and Wales; outcomes can vary based on specific facts like the exact arrears amount, mortgage type, and any prior agreements. If your query relates to another jurisdiction, please note that this assistant focuses on England and Wales, and you may wish to consult Atlas for worldwide advice.