If the Scottish Government are considering extending the Protections that were introduced by the Coronavirus (Scotland) Act 2020 beyond the 30th of September 2021, they should do what they failed to do last time and increase protections for Scottish Homeowners.
Throughout the Coronavirus Crisis, the plight of tenants has attracted more attention than that of Homeowners, to the extent you would be forgiven for believing there is no risk to homeowners or a greater risk for tenants.
However, this is not the case, and arguably, the risk to homeowners is greater now than it is for tenants.
Homeowners lack a Safety Net
Like tenants, homeowners are at the same risk of experiencing income shocks and have been as likely to have been furloughed, or made unemployed.
Also contrary to popular perceptions, the vast majority have no more financial security or stability than many tenants do. In addition to that, the safety net that is the UK Welfare State, barely exists for them.
Homeowners, do not have the same level of protections as Tenants: they cannot claim Housing Benefit or their Housing Costs when they claim Universal Credit. Discretionary Housing Payments, a discretionary benefit paid by local authorities, to help with housing costs, is not available to them; and the Scottish Government’s Tenants Support Hardship Fund, is only, as the name suggests, for Tenants.
The only UK benefit that exists for them is the Support for Mortgage Interest Payments Scheme, which you would struggle to call a benefit anymore.
Support for Mortgage Interest (SMI)
Since the last crisis (the Credit Crunch) the benefits of SMI have now been eroded under 11 years of Conservative Government, with the waiting time before someone can claim now being 39, rather than 13, weeks; in addition to that, whereas the payments received were previously a benefit, they are now effectively a loan secured over your home.
In addition to that, SMI does not even pay all of someone’s mortgage, but only interest up to the first 2.09% on mortgages up to £200,000.
Now for those who are in a position to have been able to benefit from historically low interest rates, 2.09% may seem more than sufficient, but this fails to acknowledge that across the UK there are millions trapped in higher rate mortgages, where the finance company’s standard variable rate is sometimes as high as 4-5%.
For those with those higher-level mortgages, or higher interest rates, the Scheme will not even pay the interest on their loans.
Coronavirus (Scotland) Act 2020
Now during this Crisis, unlike the last one, homeowners do appear to have been overlooked.
Last time around, there were working groups set up, Pre-Action Requirements were introduced through the Homeowners and Debtor Protection (Scotland) Act 2010, the Scottish Government’s Homeowners Support Fund was refreshed, with a Shared Equity Scheme introduced to compliment the existing Mortgage to Rent Scheme.
However, this time around, homeowners, appear to have been overlooked by the Scottish Government when drafting the emergency legislation that was laid before the Scottish Parliament. Like with tenants, no eviction or repossession ban was introduced until December 2020; but in April 2020, tenants got the additional protection of landlords (both social and private) being required to give them 6 months’ notice before they raised court action against them.
Homeowners got no such protection and still don’t have any similar protection, despite it being within the legislative authority of the Scottish Parliament to require Mortgage providers to serve a 6 months, rather than 2 months calling up notice on homeowners before raising legal action.
The piece of legislation that governs this area of law is the Conveyancing and Feudal Reform (Scotland) Act 1970 and it is wholly with the legislative powers of the Scottish Parliament to amend it.
We cannot just rely on Lender Forbearance.
The reasons why Homeowners were overlooked when this emergency legislation was introduced, is not exactly clear. Possibly the thought of Homeowners losing their home did not occur to the Scottish Government.
However, it is also true at the time when Lockdown began, the UK Financial Conduct Authority was quick to act and issued guidance to all UK banks that anyone affected by Covid 19 should be offered a 3-month payment break. Some were then offered additional payment breaks.
However, as we now enter the 14 month of this crisis, lender’s forbearance is wearing thin and we must remember that although many were offered payment breaks, lenders on the whole did not freeze interest and charges on their loans. Also when people do begin making payments again, many lenders want higher monthly payments to catch up on missed payments.
For those who are continuing to struggle and who may still be affected financially by Covid, the risks that a lender may issue a calling up notice and raise a repossession action within 2 months is now a real danger and will only grow.
This risk can only increase as we come out of this public health crisis and the support schemes that were put in place, such as the Furlough and Self-employed Income Support Schemes are withdrawn. We will not know what the medium to long term effects are of this until March 2023, at the earliest.
Unemployment may increase and people may be forced to accept reduced hours of work or lower rates of pay as businesses look to recover. Against that background those that are struggling to get by will have pretty much no benefit system available to support them with their housing costs.
It, therefore, seems inevitable that the Scottish Government will have to consider extending many of the protections in the Coronavirus (Scotland) Act 2020 for tenants and consumers to the beginning of 2023 or even longer. If they do, then they need to also think about placing homeowners on an equal footing with tenants and requiring any calling up notice to give 6, rather than 2 months notice of any intended legal action.