The Government has announced moves to help people who are struggling to pay their mortgage avoid losing their home as it warned Britain was heading for a recession.
New guidance is being issued to the courts calling on them to stop repossession actions unless all alternatives to keep people in their home have failed.
Lenders who do continue to press to take over someone’s property will have to demonstrate to the courts that they have explored all other options, to ensure that repossession is only ever a last resort.
The new pre-action protocol, which will come into force on November 19, recommends that lenders and borrowers discuss the cause of arrears, and whether the problem is likely to be temporary or long term.
They must also explore options to help people stay in their home, such as extending their mortgage term, changing the type of mortgage they have, deferring the payment of interest and adding arrears to the overall loan.
Around 18,900 people lost their homes during the first half of the year, 48 per cent more than during the same period of 2007 and the highest figure since 1996.
The level of repossessions is expected to continue rising during the second half of the year to reach 45,000 for 2008.
Chief Secretary to the Treasury Yvette Cooper said: “We need to make sure we help those who might be hardest hit in the tougher times ahead, ensuring repossession is the last resort not the first.”
The Government also announced it was proposing bringing sale and rent back companies under the regulation of the Financial Services Authority.