The Financial Times reports that there has been an increase in the amount of borrowers defaulting on their loans, as the cost of living crisis continues to bite. In the past 18 months, UK households have been hit by soaring energy and fuel prices, higher grocery bills, and steep rises in rent and mortgage repayments.
The extra strain has not been matched by a corresponding rise in wages for many workers in the UK, despite widespread industrial action. As a result, many people are struggling to make ends meet and are unable to fulfil all of their financial commitments.
This may lead to a missed mortgage repayment which then creates an extra source of stress and worry. It’s important to take some immediate steps to prevent the situation from becoming even more damaging. Here’s a look at what you can do.
The first step is to contact your lender. They will give you a grace period of between five days and fifteen days after the due date, after which you will be charged a late payment fee, which could be between 3-6% of the total monthly payment. If you can possibly clear the debt within this time frame, you should avoid any negative consequences.
However, after the grace period the missed payment will be reported to major credit bureaus and this will adversely affect your credit score. Your account will be considered to be in arrears. If the account is still in arrears after 90 days, the lender will issue you with a default notice and you will be given seven days to take further action.
If you still fail to make the required payments or contact your lender to discuss the situation, then you will be subject to legal proceedings and the lender has the right to repossess your home. Your credit score will be more severely impacted and this will damage your chances of being able to borrow money in the future.
Therefore, it is crucial that you open a communication channel with your lender to try and resolve the issue before it reaches this stage. Bear in mind that your lender is obliged by the Financial Conduct Authority (FCA) to treat customers fairly and make an attempt to help and consider any requests that you make.
It is in the lender’s best interest to help their customers and find a way to continue the loan if possible. They will have trained and experienced staff available to talk you through your options.
All lenders will have different policies, but they may agree to a temporary period where you just pay the interest on the loan, rather than make the full repayment. This means that you will have more to pay in the future. Another option may be to extend the term of your loan, so that you repay it over a longer period of time, thus reducing the monthly payments.
In some circumstances, the lender may agree to a mortgage holiday which will allow you to delay your payments until your financial circumstances have improved.
If you are looking for a mortgage broker for defaults, please get in touch with us today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
Back to Blog
Create Finance Limited. Company Reg: 09582938. Registered Office: 35 Friar Gate Studios, Ford Street, Derby, Derbyshire, DE1 1EE.
Create Finance Limited is registered with the Data Protection Act registration No. ZA129368 and is authorised and regulated by the Financial Conduct Authority under Firm Reference Number 708799 an Appointed Representative of TMG Direct Limited which is authorised and regulated by the Financial Conduct Authority under Firm Reference Number 786245 and registered with the Data Protection Act Registration No: ZA178200.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The overall cost for comparison is 4.8% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.
We may receive commission that will vary depending on the lender, product or permissible factors, The nature of any commission model will be confirmed to you before you proceed. Create Finance Ltd are a credit broker, not a lender.