As the tight grip of the UK’s current economic crisis takes hold, millions are starting to notice that their money isn’t getting them as far as it once did. The price of energy bills has increased significantly, costing homeowners and renters thousands more per year. The cost of daily essential groceries has gone up to levels that we haven’t ever seen, and a combination of all these extra costs has started to take it’s toll. Recent data released by Which? showed that over 700,000 homeowners or tenants in the UK missed mortgage or rent payments or even went so far as defaulted on these agreements in April 2023.
What Does It Mean If You Have Missed Mortgage Or Rent Payments
Missing any kind of payment on any kind of financial agreement is serious and can have a lot of negative implications, so it should be avoided at all costs if possible. With things like missed mortgage or missed rental payments, you have entered into a legal contract with a bank, building society, a landlord, or local authority and have agreed to pay a certain amount per month. If you miss these agreed payments, whether it is your fault or not, you are breaking this contract.
Normally if you are late to pay your mortgage, and pay it back quickly, the repercussions shouldn’t be too bad. However, the missed or late payment will show on your credit file as such and can be picked up by any other credit search you might have in the future. E.g. if you are applying for car finance, they will most likely carry out a credit search on you prior to securing the finance. If your missed or late payment from the mortgage is still showing on your credit file, this could be picked up and could lead to the finance company rejecting your request. As long as the missed payment or late payment is satisfied quickly and all paid up, this mark on your credit file could drop off within a few months depending on which credit agency you are using.
If you pay your landlord or the local authority via direct debt or standing order, and an attempt to pay your rent from your account fails, this could still show on your file as a missed or late payment and should be treated with the same importance as a missed mortgage payment.
What Does It Mean If You Get A Default On Your Mortgage Payments
Getting a default on your account is the next stage if you continue to miss your mortgage payments. This is a much more severe repercussion and can lead to your credit file being seriously harmed. As with missing mortgage or rent payments, defaulting on your account should be avoided at all costs. A default occurs when your mortgage account (or any other kind of months payment finance) is in a continual state of missed or late payments without being satisfied and paid up. That means that if you miss one months mortgage payment and then another month, and then another, etc… your account will be defaulted.
A defaulted mortgage payment will show on your credit file and will likely stay there for several years unfortunately. This default will hinder your ability to get future finance or most kinds and many mortgage lenders will not offer new mortgages to borrowers who have mortgage defaults showing on their credit files. A constantly defaulted mortgage account will ultimately lead to property repossession where you can lose your house.
700,000 Missed Mortgage and Rent Payments In April 2023
Which? have revealed that rising mortgage costs, rising rent, increased energy and food bills have combined to make a deadly cocktail in April 2023. Unfortunately, this cocktail has led to 700,000 missed payments on rent and mortgages, a staggering figure. According to Which? an estimated 2 million households missed or defaulted on at least one mortgage, rent, loan, credit card or bill payment in April 2023. That equates to a 7.3% missed payment rate, which was more or less at the same level this time last year, but much higher than in April 2021 and April 2020. Around 1 in 20 renters surveyed also admitted to missing payments last month.
But there is a silver lining to these shocking figures. The 7.3% missed payments figure for April 2023 is in fact lower than the figure in March 2023, which saw around 2.5 million homes miss or defaulted on a payment. Equating to around an 8.8% missed payment figure.
What Can I Do To Avoid Missing Mortgage Payments
We have a full in-depth blog available on our website which goes into more detail about how to avoid defaulting on mortgage payments, which you can read for free. In a nutshell, there are two key things that you need to do to avoid missing and defaulting on mortgage payments, and if you think that you could be at risk of missing payments, you need to act fast before it’s too late.
The first thing to do is always speak with a mortgage advisor. If you are struggling with your current level of mortgage borrowing or your current product and rate, speak with a professional who will help you. Mortgage advisors know the mortgage market and know what is best for your situation. A mortgage professional can help you to re-structure your loan and search the market for the most competitive rates and products that will better suit your situation.
The second thing to do is speak to your financial advisor about your current financial situation, including income and outgoings and work with them to cut back and budget better. A financial advisor will be able to look at your financial situation as a whole and can determine what you need to be doing to make the most out of your money.
Speak To An Advisor At Oportfolio Mortgages
At Oportfolio mortgages, we are committed to making sure anyone who needs our financial help gets the best advice possible. Our team have years of experience in mortgages and personal finance and can help you to feel more comfortable with your finances in an unstable financial situation such as the economic crisis that we find ourselves in. Call our team today to see how we can help.