The Effect of Cost-of-Living Crisis on Home Repossessions

The Effect of Cost-of-Living Crisis on Home Repossessions

The cost of living crisis has been ongoing since late 2021 and it shows no signs of improving in the short term. As costs continue spiral, millions of people in the UK are struggling to make ends meet. As a result, an increasing number of people will experience debt problems and face the threat of house Repossessions.

In this blog post, we take a closer look at what the cost-of-living crisis really means, how it’s affecting house repossessions and what you can do to protect your property.

What is the Cost-of-Living Crisis?

The cost-of-living crisis refers to the increasing cost of essential items and interest rates in comparison to stagnating wages and benefits payments.

When the cost of essentials increases at a higher rate than wages and benefits payments, people experience a drop in disposable income. In many instances, people are left with no disposable income at all and may struggle to pay essential bills, such as mortgages, food and electricity.

Why Are Interest Rates So High?

Amidst high fuel prices, soaring energy costs and increasing food bills, interest rates have also been rising consistently over the last 15 months. The Bank of England Base Rate has increased from 0.1% in November 2021 to 4% in February 2023.

This base rate represents the amount of interest banks and mortgage companies pay to borrow funds. When the base rate is high, it costs banks and mortgage companies more and they pass these costs on to customers by increasing their own interest rates.

As a result, borrowers will face higher mortgage rates, which means monthly repayments will increase. If you have a standard variable or a tracker mortgage, you are likely already paying more each month than you were a year ago. Alternatively, if you have a fixed term mortgage, you are likely to pay a higher interest rate when your current fixed term comes to an end.

In addition to this, inflation is 10.5% as of February 2023. This represents the costs of everyday items, such as bread or clothing, as well as larger purchases, such as cars or holidays. The UK inflation is currently the highest it’s been in nearly 40 years, which means the cost of living is at an all-time high.

The combination of a high Bank of England base rate and high inflation means we are facing a sharp increase in outgoings, even though salaries and benefits payments are increasing at the same rate. Of course, the natural consequence of this is that people have less money to meet their essential needs and are more likely to get into debt.

How Is the Cost-of-Living Crisis Affecting House Repossessions?

With so many people struggling to pay their bills due to the cost-of-living crisis, more people are likely to get into mortgage arrears and risk having their homes repossessed.

According to recent statistics, house repossessions increased by 90% in late 2022 and experts are warning that more repossessions are likely to occur as the cost of living crisis continues.

How to Stop House Repossession

If you are worried about your finances, taking action now could help to avoid repossession in the future. Reconfiguring your household budget and reducing non-essential costs could make it easier to meet your monthly mortgage repayments, for example. Additionally, finding out if you are entitled to financial help could be a viable way to increase your income and alleviate financial worries.

However, if you are already in mortgage arrears, you will need to make contact with your mortgage lender if you want to stop your home being repossessed. By negotiating a repayment plan, for example, you can prevent your lender from starting court action.

Is It Too Late to Stop Repossession Once Proceedings Have Started?

No. You can stop house repossession at any time, even if your mortgage lender has already started legal proceedings. You may even be able to negotiate with your lender and come to an agreement before a repossession hearing occurs or you could ask the court to issue a suspended possession order and set out a repayment schedule to enable you to clear your arrears.

How Can HomeKeep Solutions Help You Keep Your Home?

At HomeKeep Solutions, we understand how stressful the threat of repossession can be and we will do everything possible to help you keep your home. From negotiating with lenders to assisting you with the court process, our legal experts are on hand 24/7 to provide the help you need.