Homeowners face a winter of repossessions unless the government takes urgent action to support people struggling with mortgages amid the coronavirus job losses, Labour has warned.
Unveiling a new plan to help those fearing the loss of their home, shadow chancellor Anneliese Dodds called for a three-month extension of the current “mortgage holiday” that is due to finish at the end of October.
Dodds called on her counterpart Rishi Sunak to follow the example of the last Labour government and immediately cut the waiting period for a mortgage interest support scheme that has been watered down by the Tories.
A ban on repossessions of homes by lenders, due to end on October 31, should also be extended, she said.
The government caved to pressure earlier this month to extend its ban on evictions of renters by an extra month, but there are similar fears that those who own their own home could lose it as the recession bites deeper.
With more than 700,000 jobs lost since March, and many millions more estimated to be at risk, experts have warned that the withdrawal of furlough support and a raft of schemes to help mortgage payers could lead to a “cliff edge” of misery by November.
Under current government plans, homeowners who lose their jobs and need help to cover the cost of interest payments will need to wait nine months before they can access the relevant government scheme.
Dodds told HuffPost UK that Sunak should follow the example of Gordon Brown’s government, which took decisive action in the wake of the 2008 financial crisis to ensure that families who had lost their jobs did not also lose their homes.
She called on the government to immediately reduce the waiting period for the Support for Mortgage Interest (SMI) scheme from its current 39 weeks to 13 weeks, as the Labour government did at the height of the global financial crisis.
“With the health crisis still not under control, and the jobs crisis worsening by the day, we are looking at a huge spike in unemployment this autumn thanks to the Government’s one-size-fits-all withdrawal of support,” she said.
“If that happens, thousands of families will be concerned about keeping up with mortgage repayments and fearful of losing their homes.
“The Government needs to act now to ensure people have the support they need to keep their homes. We need swift and decisive action to prevent a winter of repossessions.”
In 2009, the then Labour Government increased the loan cap to £200,000 for new working age claims, to enable more people to claim support faster at the height of the global financial crisis.
The last Tory government changed the SMI from a grant to an interest-bearing loan from April 2018.
Dodds said the Treasury should also ask the statutory Social Security Advisory Committee (SSAC) to urgently review the structure of SMI support to make sure it is targeted on those who need it most.
She said the watchdog should look in particular looking at whether the cap of £200,000, which has been in place since 2009, is still appropriate given that house prices have risen by more than 50% since then. It should also review whether the payment should be turned back into a grant rather than an interest bearing loan.
On March 17th 2020, the government announced the availability of a three-month mortgage holiday as part of its package of support for individuals, businesses and the economy.
On May 22nd 2020, the Government announced that it would extend by a further three months the mortgage holiday option, until October 31st. It also announced an extension of the ban on repossessions to the same date.
Property repossessions plunged 93% this summer after homeowners rushed to use mortgage holidays and banks were banned from seizing the houses of coronavirus-hit customers.
But the ‘holiday’ scheme is still set to cease at the end of this October.
A Treasury spokesperson said: “Mortgage payment holidays are providing vital help for hundreds of thousands of people struggling with their finances due to coronavirus.
“We keep all policies under constant review.”
The government insists that consumers that are worried about the longer-term impact on their finances should talk to their lender about options to gradually and affordably get back on track.
The Financial Conduct Authority have published a draft guidance consultation this week suggesting that lenders should move to more individualistic forms of forbearance after customers have had two holidays.