Mortgage Arrears: What to Do If You Fall Behind

What are mortgage arrears?

ArrearsArrearsArrears are payments that were due but have not been made, such as missed rent, mortgage, council tax or loan instalments.Read more → means you have missed one or more payments. Your lender will contact you, and if arrears continue the consequences become more serious. Your mortgage is a priority debtPriority and Non-Priority Debts ExplainedLearn which UK debts are priority debts, such as rent, council tax and energy bills, which are non-priority, and why the difference matters.Read more → because it is secured against your home. If you do not keep up repayments, your lender can ultimately seek a court order to take possession of your home. See priority and non-priority debts.

What to do first

1. Do not ignore it. Open letters and answer calls. Lenders are more flexible when you engage early.
2. Contact your lender. Explain your situation honestly and ask what help they can offer.
3. Get free advice. Contact StepChange, National Debtline, Citizens Advice or MoneyHelper. Debt advisers can negotiate with your lender and look at your whole budget.
4. Work out a budget. Our guide to making a debt budget explains how.
5. Check your entitlements. Look at whether you qualify for benefits or support, including Support for Mortgage Interest, which is a loan available to some people on certain benefits. Check GOV.UK for the current rules.
6. Check any insurance. You might have payment protection, income protectionIncome Protection vs Critical Illness Cover ExplainedIncome protection and critical illness cover compared: how each pays out, deferred periods, exclusions, state support and how to decide what you need in the UK.Read more → or mortgage cover that can pay out.

How lenders must treat you

The Financial Conduct Authority's rules (MCOB) require lenders to treat customers in arrears fairly. Lenders must:

• Consider reasonable requests to change the way you pay
• Try to agree a reasonable payment plan with you
• Not repossess your home unless all other reasonable attempts to resolve the situation have failed
• Give you a reasonable time to repay
• Provide information about your arrears and what they can do to help
• Charge fees that reflect the actual costs

Options your lender may offer

Support depends on your circumstances and what the lender is able to do.

• Short-term payment arrangement: pay a reduced amount for a time, or agree a plan to clear the arrears over time.
• Payment holiday: a temporary break, with interest still building up.
• Term extension: lengthening the mortgage to reduce the monthly payment, which increases total interest.
• Switching to interest-only for a period, which means you do not reduce the capital.
• Capitalising arrears: adding the arrears to the mortgage balance.
• Reduced interest rate or a product switch to a cheaper deal.
• Voluntary sale or mortgage to rent, if you cannot afford to stay.

How it affects your credit record

Missed payments are reported to the credit reference agenciesCredit reference agencyA credit reference agency is a company that collects information about people's borrowing and sells it to lenders. The main UK agencies are Experian, Equifax and TransUnion.Read more → and can reduce your credit score for years, which makes it more difficult to get credit afterwards. Agreed arrangements may be recorded differently. Ask your lender how they will report it. See how credit scores work.

The repossession process

Repossession is a last resort. The steps usually go like this in England and Wales:

1. The lender sends letters and tries to agree a solution.
2. If arrears continue, the lender must follow the Pre-Action Protocol for Mortgage Arrears, which means they should only start court action once they have followed the proper steps.
3. The lender applies to court for a possession order. You will be told and given a hearing date, which you should attend.
4. The court can make an order for possession, adjourn the case, suspend the order or set conditions, such as payments.
5. If the order is made, the lender can apply for bailiffs or court enforcement officers to remove you. You are normally given notice.

Do not do this

• Do not borrow from payday lenders or loan sharks to cover the mortgage
• Do not ignore court letters
• Do not take on secured loans or sign anything with a firm you found through an unsolicited call or advert without checking the Financial Conduct Authority Register
• Do not pay fees for advice that is available free. Be cautious about "mortgage rescue" firms, "sale and rent back" schemes and companies offering to buy your house quickly, since these have been associated with poor outcomes.

If you decide to sell

Sometimes selling is the best option. If you sell for less than the mortgage, you have a shortfall, which the lender can ask you to repay. Talk to your lender before accepting an offer. A voluntary sale may avoid repossession costs and reduce the impact on your credit file.

Support if you are in vulnerable circumstances

If you are ill, bereaved, have lost your job or are affected by domestic abuse, tell your lender. They should take that into account. You may also qualify for additional support from local authorities or charities.

Looking after yourself

Money worries take a toll on your mental health. Do not feel ashamed, and do not face it alone. Talk to someone you trust, and consider contacting your GP if you are struggling to cope. Many debt charities also offer emotional support, and acting early often brings relief.