THE ugly spectre of repossession is increasingly realistic for thousands of households across Scotland and all the signs point to the problem getting much worse.
A total of 18,900 homes in the UK were repossessed by lenders during in the first six months of this year, according to the Council of Mortgage Lenders (CML), a 41 per cent hike from the same period in 2007. And while the CML has introduced a package
of voluntary measures to address arrears, insisting lenders are treating repossession as the last resort, evidence suggests specialist lenders in particular are acting too quickly.
In the first half of this year, repossessions exceeded the number of borrowers with 12 months of arrears for the first time, research by housing policy publication Roof found. Its analysis was supported by charity Shelter, which believes specialist lenders (those dealing with subprime borrowers) are quicker to repossess than mainstream lenders.
Repossessions are expected to rise in Scotland and although the Scottish Government has pledged extra help for homeowners through its mortgage rescue scheme, there are other steps you can take to minimise the threat of repossession.
"Don't bury your head in the sand if you're facing financial trouble paying for your home," advised James Jopling, head of campaigns at Shelter Scotland. "The worst thing you can do is hide, avoid lenders, or even pay your mortgage with your credit card. The best thing you can do is face the problem head on."
EVALUATE YOUR SITUATIONUnderstand where your money is going and check what financial help you might be entitled to.
For example, can you cut back on spending at all, or get a better deal on your mortgage? Are you behind on other loans secured against your home? For advice on these issues, speak to Shelter, Money Advice Scotland or Citizens Advice. Similarly, if you have a spare room you could consider renting it out to generate extra income.
NEGOTIATE WITH YOUR LENDERIf you're behind on your loan payments it's vital to speak to your lender as soon as possible. Make sure you explain how you fell into arrears, how you propose to rectify the situation, how long it will take to do this (in the context of your loan) and give details of your income and expenditure.
Any equity you have in the property will strengthen your position.
Lenders are under pressure to avoid repossession unless there's no alternative available and should consider possible options. If your lender refuses to accept your proposals, consider applying for a Section 2 order.
STATE HELPThe Scottish Government has a mortgage rescue scheme run in conjunction with housing associations in which – in a nutshell – the housing association buys your home but you can stay in it as a tenant and have your interests protected throughout. These schemes are most suitable where your predicament is long-term and you're unable to reach an agreement with your lender.
Those schemes that are not government-backed should be avoided, such as sale and rent back schemes. To find out whether you're eligible for not-for-profit mortgage rescue schemes, contact your local council.
Alternatively, you could apply for income support mortgage interest (ISMI), which can help you pay all or part of the interest on your mortgage payments, on loans up to £100,000. You can apply using form MI 12 from the Department of Work and Pensions (www.dwp.gov.uk) or your local Jobcentre Plus office.
SECTION 2 ORDERThis is a court order that can stop your lender from repossessing your home or give you more time to find alternative accommodation in the event of your lender having the green light to repossess your property. Obtaining a section 2 order depends on several factors, such as your ability to pay monthly payments to eliminate the arrears; taking debt advice; and the property being the only home you own.
You can also apply for a section 2 to give you time to find alternative accommodation if you're married to (or in a civil partnership with) the mortgage holder.
If you can demonstrate that you can take on the mortgage payments, you may be able to live in the property and arrange to clear the arrears. Section 2 applicants should seek help from a solicitor.
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www.shelter.org.uk;
www.nationaldebtline.co.uk/scotlandHOUSING ASSOCIATION TENANTS HAVE ADDED PROTECTIONHOUSING associations don't take the decision to evict socially rented housing tenants lightly, according to Jacqui Watt, chief executive of the Scottish Federation of Housing Associations. In fact, they are obliged to prove that it is reasonable to evict and at all stages in the process help and assistance is offered to the tenant. "Our members would encourage any of their tenants who find themselves struggling to pay their rent to talk to them at the earliest possible opportunity," said Watt. "
In many cases, low awareness of tenant rights and benefits to which they are entitled puts people at unnecessary risk of eviction, added Watt, while many are uncomfortable with seeking help.
"Every housing association in Scotland has a robust arrears prevention policy and most can provide access to specialist debt advice and counselling," said Watt.
"There are countless examples of tenants who had thought eviction was inevitable, who were subsequently given assistance which allowed them to remain in their property. This can only be achieved by the tenant engaging and co-operating with their landlord."
