How to hold onto the property ladder

No matter how bad things get during the present squeeze there are always options for UK homeowners say Shelter, Citizens Advice and the Council of Mortgage Lenders (CML).

Household finances have been badly stretched in the past year as the cost of energy has increases by 17 per cent and the cost of food rises by 12 per cent, according Office for National Statistics (ONS) figures.

The credit crunch also means the cost of new mortgages has increased, with fewer mortgages available to choose from, all of which are more difficult to obtain.

These factors are making life harder for the 1.4 million borrowers coming off cheaper, fixed-rate mortgages in 2008. But there are ways to help yourself and organisations to help you cope if you are struggling.

Together the three organisations have put together a guide for homeowners who may be facing financial strife as the property market weakens.

Ten tips for staying on the housing ladder

Get talking

If owners are worried about their finances the first move should be to start talking: talk to your lender; talk to their partner, and talk to a free independent debt adviser or charity.

The earlier homeowners contact lenders, the more options available to solve the problem.

Options lenders may consider include: extending the term of the mortgage, changing the type of mortgage, deferring interest payments for a short period, and treating the arrears as part of the original debt.

Get advice

There are many organisations which offer free and independent money advice such as Citizens Advice, Shelter, National Debtline, and the Consumer Credit Counselling Service (CCCS).

Debt advisers with these organisations can assess individual situations and devise the best course of action.

"We would urge anyone who is falling behind with payments on a mortgage or secured loan to speak to their lender and seek free, confidential, independent advice straight away," says Citizens Advice chief executive, David Harker.

"Getting advice, even at a late stage, can help the majority of people come to a workable agreement with their mortgage lender and can make all the difference between saving or losing their home."

Plan ahead

If borrowers are coming to the end of a fixed-rate mortgage in the near future the CML recommends planning ahead for higher repayments and researching the best deals in the market ahead of time.

Don’t bury your head in the sand

Ignoring debt problems will only make them worse. Positive action will help find ways to solve them.

Pay your priority debts first

A mortgage is a priority debt; as if it is not paid borrowers could lose their homes. Debt advisers can help plan a budget and in order to pay priority debts first.

Pay what you can each month

If you borrowers are unable to afford full mortgage repayments, they should talk to lenders and pay what you can be afforded.

Open all your post

Don’t ignore letters or telephone calls from lenders; if borrowers are unsure what they mean ask lenders or debt advisers.

Open all mail that is addressed 'to the occupiers'; if mortgage holders are the tenant this is how the mortgage lender will contact you if the landlord has a payment problem.

Facing possession proceedings? Don’t panic

Always attend court hearings yourself.

Court proceedings do not mean borrowers will automatically lose their homes.

The court process acts as a final check to make sure repossession is the last resort. Some courts have advice desks which can provide last minute assistance.

"Lenders will treat you fairly and use repossession only as a last resort," said CML director general, Michael Coogan.

"If you take positive action to contact your lender, pay what you can, and show up to court and make your case, you are more likely to reach an agreement your lender that allows you to stay in your home.

"But you cannot just walk away and assume you are no longer responsible for the mortgage."

Don’t abandon your property

If borrowers are struggling with mortgage repayments it may be tempting to send the keys to your lender or abandon your property. Don’t do this without advice.

Homeowners could still be responsible for the debt on the property and may be pursued for it years later.

Take care with 'mortgage rescue'

Selling a home and renting it back might seem like a quick fix to debt problems. But, many of these schemes offer very little security. They are also not regulated so you will not have access to the same protections as a mortgage holder.