The safety net for homeowners facing financial difficulty has been scaled back over the last decade, a report commissioned by UK Finance has concluded.
Following the 2008 financial crisis the government strengthened the safety net for homebuyers but most of this support has now been withdrawn.
Support will be further reduced in April 2018, when the government is due to stop paying Support for Mortgage Interest as a grant and replace it with a new and less generous form of support – Loans for Mortgage Interest, repayable when the house is sold off and transferred to a new owner.
June Deasy, UK Finance’s head of mortgage policy, said: “As this research highlights, there have been significant changes in the benefit system affecting home-owners.
“It is important that they are aware of these changes and how they may be affected.
“There is a significant role for the government and the forthcoming Single Financial Guidance Body in ensuring these changes are as widely understood as possible.
“Lenders have responsibilities to help manage the consequences of diminishing support for homeowners in difficulty.
They will always work with borrowers to help them manage a period of temporary difficulty, and avoid possession wherever possible.
“Borrowers are also encouraged to talk to their lender at the earliest opportunity if they experience financial difficulty.”
By 2022 help for homeowners in financial difficulty will be limited mainly to loans to those who do not work.
For people with a job, even in part-time or low-paid employment, the system will rely largely on what individual homeowners can do for themselves, supported by lenders operating within the legal and regulatory safeguards.
The report, entitled Challenges for our Home Ownership Safety Net: UK and International Perspectives, found that, while many nations do not provide support specifically for mortgage borrowers, in some cases this is because they already have more generous income support measures in place.
In countries where mortgage markets have suffered badly because of the financial crisis and subsequent recession, governments have often responded with emergency policies to reduce evictions, modify mortgage terms, transfer homes into the rental sector and provide other support.
There has also been regulation to reinforce economic stability and limit risks posed by financial institutions.