Advisers say that the most important thing to do if you fall into mortgage arrears is to speak to your lender - and the earlier the better - if possible, even before you miss a monthly payment. Mortgage lenders have all agreed to deal with arrears "positively and sympathetically", so they should be prepared to help you to come to an arrangement that enables you keep your home while maintaining a reduced monthly payment.
Your lender may agree to let you switch it to an interest-only basis or increase the term of the mortgage or both. These will enable you to reduce your monthly repayments.
You must also examine all your other household expenditure. Prioritise those payments where a default has the most serious consequences. For example, failing to pay the HP on your car will eventually lead to you losing it and non-payment of utility bills will result in you being cut off. Our advice is if you have reached that sort of situation speaks to a debt adviser. Look online or contact you local Citizens' Advice centre.
So how long have you got before your mortgage lender is likely to start repossession proceedings? It is a fact that if you allow your arrears build up from month to month, without any other action, your mortgage lender will lose patience and eventually apply to the courts for a repossession order.
Whilst the Royal Bank of Scotland has said that it will wait 6 months after the first arrears before commencing proceedings, other lenders have set the minimum at 3 months but in practice they are unlikely to act much quicker. The Halifax, which is still Britain's biggest mortgage lender, says that if borrowers speak to them in good time about their problems, it will rarely start proceedings within 6 months.
HSBC, meanwhile, has said that as it has few severe cases of arrears, this enables it to deal with arrears on a case-by-case basis. It warned, however, that in some cases it would repossess before 3 months have passed - although this would only happen when repossession was in the borrower's interest - for example, when a court repossession order was required to support a claim for social housing.
Barclays bank has said that their conservative, tailored approach to lending plus actions to keep customers in their homes has resulted in very low repossession rates. Therefore, they claim that a change in their repossession policy from 3 to 6 months would have little effect on their customers.
If your lender has started repossession proceedings, what happens next? Well mortgage lenders have to follow a specific procedure agree with the government (it's called a protocol), before they can take you to court. The protocol formally lays out a number of steps they must take before they consider court proceedings.
They include giving you information about the value of your arrears and whether charges and interest will be added; they must talk to you (or someone acting on your behalf) about the reason you're in arrears and establish your financial circumstances. They must also ask you for your proposals for repayment and consider any request from you to change the date of your monthly payment. If you have defaulted on a payment agreement, they must give you ample notice that they will commence court action unless you catch up with all your missed payments. And it can take another 70 to 75 days before the court will hear the action.
If the case does go to court, the judge will establish whether your lender has kept to the protocol and will take that into account when making a judgement. One charity observed that adherence to the protocol does have a big affect on the outcome of the case.
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