| Cannot Pay Mortgage — Key Facts | |
|---|---|
| MCOB 13 | FCA rules require lenders to treat customers in arrears fairly and explore all options |
| Pre-Action Protocol | Lenders must follow court Pre-Action Protocol before applying for possession |
| Breathing Space | 60-day moratorium stops arrears charges and enforcement (Debt Respite Scheme 2020) |
| SMI | Support for Mortgage Interest — government loan covers interest while on qualifying benefits |
| Repossession | Lenders cannot repossess without a court order; the court has wide discretion to adjourn |
Missing a mortgage payment is serious, but lenders have strict FCA obligations that give you more time and options than most borrowers realise. The key is to act immediately — contact your lender before you miss a payment if at all possible.
Step 1 — Contact Your Lender Immediately
Under FCA MCOB 13.3, lenders must make reasonable efforts to reach an agreement with a borrower in payment difficulties before taking enforcement action. You must initiate contact — lenders who receive no response are more likely to move to court action. Call your lender's arrears team (not the main number), explain your situation, and ask what forbearance options are available. Document every conversation with date, time and the name of the person you spoke to.
Step 2 — Understand Your Five Options
| Option | How it works | Impact on balance | Suitable for |
|---|---|---|---|
| Payment holiday | Pause payments for 1–6 months; interest added to balance | Balance increases | Short-term income shock |
| Reduced payments | Pay what you can afford temporarily | Arrears accumulate but slowly | Reduced income |
| Interest-only switch | Pay only interest; capital balance unchanged | No increase if rate unchanged | Extended difficulty |
| Extend term | Spread balance over longer period, lower monthly cost | More total interest paid | Permanent income reduction |
| Capitalise arrears | Add arrears to mortgage balance and restart | Balance increases by arrears amount | One-off crisis now resolved |
MCOB 13 — Your Lender's Legal Obligations
MCOB 13 (Arrears and Repossessions) sets out what your lender must and must not do. Key obligations: the lender must consider any reasonable request for a change in payment terms; must not apply charges that are a higher proportion of arrears than is reasonable; must provide a written statement of arrears at least quarterly; and must not start repossession proceedings where a court would be likely to adjourn them under the Administration of Justice Act 1970. (Source: FCA MCOB 13)
| ⚠️ Warning: A lender that refuses all forbearance options without explanation may be breaching MCOB 13. File a formal complaint and escalate to the Financial Ombudsman Service if unresolved within 8 weeks. |
Pre-Action Protocol for Possession Claims
Before applying to court the lender must comply with the Pre-Action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears. This requires: sending a pre-action letter at least 15 business days before issuing proceedings; considering any proposal made by the borrower; providing a breakdown of arrears; and confirming what contact was attempted. If a lender issues court proceedings without following the protocol, the court can stay the claim and award costs against the lender. (Source: Civil Procedure Rules Practice Direction — Pre-Action Conduct and Protocols)
Support for Mortgage Interest (SMI)
If you are receiving Universal Credit, Pension Credit, Income Support, income-based Jobseeker's Allowance or income-related Employment and Support Allowance, you may qualify for Support for Mortgage Interest. SMI is a government loan (not a grant) that pays the interest portion of your mortgage while you receive qualifying benefits. The loan accrues interest at a rate linked to OBR forecasts and must be repaid when you sell or transfer the property. Apply via your Jobcentre or the DWP SMI helpline. (Source: gov.uk — Support for Mortgage Interest)
Breathing Space
The Breathing Space scheme (Debt Respite Scheme Regulations 2020) gives you 60 days in which creditors — including your mortgage lender — cannot add interest, fees or charges to existing arrears and cannot start new enforcement action. It does not suspend your obligation to make your normal monthly mortgage payment. Access Breathing Space through a free debt adviser: StepChange (stepchange.org), National Debtline or Citizens Advice. A Mental Health Crisis Breathing Space lasts for the duration of mental health crisis treatment plus 30 days.
Court Protections
If your lender does apply for a possession order, the court has wide discretion under the Administration of Justice Act 1970 to adjourn, stay, suspend or postpone the order if it appears likely that you will be able to pay the sums due within a reasonable period. In practice county courts regularly adjourn possession hearings to give borrowers time to arrange a payment plan. You should attend the hearing and bring a written offer of payment. Free legal representation is available at most county courts on possession hearing days through the duty solicitor scheme.
| Disclaimer: This article is for information only and does not constitute financial, legal or tax advice. Figures are correct at date of publication but may change. Always check primary sources (gov.uk, FCA register) and consult a qualified adviser for guidance tailored to your situation. |
Frequently Asked Questions
How many payments can I miss before my lender starts repossession?
There is no fixed number. FCA MCOB 13 requires lenders to explore all forbearance options before court action. In practice most lenders do not apply for a possession order until at least 3–6 months of arrears have accumulated and you have not responded to contact. Engaging early prevents escalation.
Will mortgage arrears affect my credit score?
Yes. A missed payment is typically recorded after it is 30 days late. A formal default is recorded after 3–6 months. Both stay on your credit file for 6 years from the date recorded. (Source: ICO)
Can I switch to interest-only without my lender's permission?
No. Switching to interest-only requires a formal agreement. Under FCA MCOB 13 and the Consumer Duty, lenders must actively consider this option when you are in financial difficulty — request it in writing and keep records.
Does Breathing Space stop mortgage repossession?
Breathing Space prevents lenders from taking new enforcement action on existing arrears for 60 days and stops arrears charges accruing. It does not suspend your obligation to make your normal monthly payments.
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