Scottish Government needs to act to Protect Homeowners

Scottish Government needs to act to Protect Homeowners

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. 

 

Eviction Ban: How to use it to your Benefit

Eviction Ban: How to use it to your Benefit

The Scottish Government’s decision to extend its eviction and repossession ban has thrown a lifeline to many Scots and their families.

However, although the Scottish Government has said they have an option of extending the ban beyond the 31st March 2021, people should not assume they will and should use this time to take steps to help themselves.

In this post we look at what tenants and homeowners can do to help themselves. 

Episode Two: The Scottish Tenancy Hardship Loan Fund

Get Advice

The most important thing you can do if you have mortgage or rent or mortgage arrears is get advice.

The second most important thing you can do is speak to your Landlord or Mortgage providers. They may be able to help you.

In terms of Landlords, it is in their interest to help you. Currently the law states that if they want to evict you, they must first give you six month notice before they even initiate legal action. Even if they have done that and obtained an order to evict you, the eviction ban means they currently cannot remove you from the property. The most effective way for them to get their money, therefore, is to work with you.

Also, Mortgage Providers have been told by they UK Financial Regulator, the Financial Conduct Authority, that they must work with home owners and where it is required give them support.

If you don’t feel able to do this or you need help claiming benefits, then contacting your local advice agency is important as they can assist you.

Maximise your Income

If you have been affected by the Covid 19 Crisis fiancially, then you may be entitled to financial assistance from the UK Government.

This may come in the form of the UK Furlough Scheme (speak to your employer) or the Self-Employed Income Support Scheme 

Also you may be entitled to additional social security benefits such as Universal Credit and help with your housing costs.

Unfortunately, you cannot get help with your mortgage through Universal Credit, but there is some support in the form of a secured loan available through the UK Government’s Support for Mortgage Interest Scheme (although you do need to wait 39 weeks before that support becomes available).

The most important thing you can, therefore, is look at how you can maximise your income. 

One way of doing this, is by completing a full benefit check for yourself.

Discretionary Housing Payment

If you are a tenant and you are having difficulty paying your rent, you may be entitled to a Discretionary Housing Payment.

A Discretionary Housing Payment is a payment that your Local Authority can pay to you or your Landlord to help you with your rent.

These payments can be in addition to other payments to help you with your housing costs, such as through Universal Credit.

They cannot be use to pay rent arrears, however, where you cannot pay your full rent because Universal Credit won’t cover the full cost, or you have been affected by the Benefit Cap, or your income has dropped, DHPs can be awarded to make up the difference.

They can also be backdated, so they may reduce your rent arrears.

If you are interested in applying for a Discretionary Housing Payment, you should contact your Local Authority.

What is Changing with the Debt Arrangement Scheme

Scottish Welfare Fund

All of Scotland’s Local Authorities can provide people with non-repayable grants through the Scottish Welfare Fund.

The types of grants that are available are Crisis Grants and Community Care Grants.

Non of these can be awarded to help pay rent or mortgage costs, however, they can be provided for other reasons if you are struggling financially and this may help you with other costs.

Crisis Grants can be paid to help you with your day to day living costs if you are experiencing any financial hardship and are intended to pay for essential living costs such as food and ensuring you home is heated.

Community Care Grants can be paid to cover the cost of larger items that need replaced, and are essential, such as beds, flooring, curtains and cookers.

If you want to apply to the Scottish Welfare Fund, you should contact your local authority.

rent arrears

Tenancy Support Hardship Fund

The Tenancy Support Hardship Fund should be the last option you should explore if you have rent arrears.

This is because it means borrowing from the Scottish Government a loan to pay your rent arrears, that you then must repay.

However, the Loan is interest free and does not need to be repaid immediately. Once you have borrowed from it, you don’t need to make any payments for the six months.

After that you have up to five years to repay the loan.

In addition to that if you are financially struggling to repay the loan, you cannot be evicted, unlike if you don’t repay your rent.

The Tenancy Support Hardship Fund can only cover rent arrears that have been accrued since the 1st of January 2020.

If you want to apply to the Tenancy Support Hardship Fund, you do online via a Scottish Government Webpage.

Once the sequestration is awarded by the Accountant in Bankruptcy, or by the Court (where a creditor makes you bankrupt), the Trustee notifies the creditor and the wage arrestment should cease.

Rent Arrears

Dealing with Rent Arrears

If you are experiencing difficulty with your rent arrears, our page on Rent Arrears and how to deal with them will provide you with more information.

Dealing with Mortgage Arrears

Our page on Mortgage Arrears also explains the process that mortgage providers must use when you get into mortgage arrears and tell you what your rights are. For more information, click below.

Homeowners Not Receiving Regulated Advice

It has been revealed homeowners in receipt of Support for Mortgage Interest (SMI), who are being contacted about accepting Government loans that will replace the SMI benefit scheme in April, are being referred to advice agencies that cannot give them advice.

The revelation comes after Margaret Greenwood (MP) submitted a written question to the UK Government:

To ask the Secretary of State for Work and Pensions, which organisations Serco signposts Support for Mortgage Interest claimants to for advice on deciding whether to take out a loan from her Department to replace the benefit they are currently receiving; and whether such organisations are able to offer financial advice on taking out a loan.

Kit Malthouse, Parliamentary Under-Secretary (Department for Work and Pensions) responded:

All existing recipients of Support for Mortgage Interest will be contacted and given information about the changes. The information leaflet and Frequently Asked Questions booklet point claimants to organisations who can offer impartial, free support. These include Money Advice Service, Shelter and Citizens Advice Bureau. These organisations do not offer regulated financial advice, however they can support claimants to understand the options available to them.

For more information on the new loan scheme, see here

Mortgage Arrears to Increase as DWP Mortgage Support Cut

Mortgage Arrears to Increase as DWP Mortgage Support Cut

The announcement that the mortgage interest rate that the Department of Works and Pensions pays under the Support for Mortgage Interest Scheme is to be cut, will be devastating for many low income households.

The Scheme, which pays the interest part of a benefit claimant’s mortgage, does so only up to certain levels of interest rates. Currently, that rate is 6.08%, so if your mortgage rate is higher than that, there is a shortfall on the interest part of your mortgage payments which you need to make up. As the scheme only pays the interest part of you mortgage, many claimants, even when they are receiving full payments to the interest, must make additional payments from their benefits to the capital part of their mortgage.

After the 1st October, the rate will fall to 3.63%. This is the Bank of England’s average monthly mortgage interest payment. For many low income families, however, usually the groups that are more in need of help  and least able to get the most competitive rates available, this will not be enough.

With increasing signs that mortgage lenders are not allowing borrowers to switch to interest only mortgages, the most vulnerable could see shortfalls, not only in the capital repayment element of their mortgage, but the interest element also.

If further proof is needed that repossessions will begin rocketing out of control under this ConDem coalition, this is it. To date the actions of the previous  Government at Westminster and the Government in Edinburgh have prevented repossessions reaching the level predicted by the Council of Mortgage Lenders and in actual fact there is evidence they have fallen.

But not for long!