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Mortgage arrears and possessions have not risen to the levels suffered in the last housing market downturn – mainly due to the sharp fall in interest rates, and temporary industry and Government support measures – but with the downturn continuing they are forecast to rise substantially. 

Mortgage arrears are a systemic feature of home-ownership. Events beyond the control of the households concerned – e.g. loss of income due to unemployment, ill-health or household break-ups – cannot be eradicated by a more prudent mortgage lending regime. 

The current UK safety net for home-buyers is patchy, and is set to be weakened further under Universal Credit and with a further decline in the take-up of mortgage payment protection insurance because of new rules governing the sales process. Voluntary take-up had already declined before the downturn so there can be no credible return to the prior policy of relying on this. 

The study highlights two key options for providing a more effective safety net while balancing out risks, responsibilities, roles and costs. The most effective would be a compulsory new partnership, similar to the Sustainable Home Ownership Partnership (SHOP) scheme. The scope and costs of the scheme could be modified by making longer-term benefit payments a charge on the borrowers' homes. 

A second option would be a new partnership structure based around continued forbearance, an auto-enrolled private insurance system and a state-backed payment system, with longer-term costs being charged to homes.

The full report and summary are available on the JRF website:

Building an Effective Safety Net for Home Owners and the Housing Market