Remortgage, not repossession

Fresh warnings have been issued over a voluntary code protecting repossession-threatened homeowners who cannot afford to remortgage.

Plans to introduce the code, which would set out rules governing the practice of firms who buy homes from people facing repossession and then rent the property to the former owner, were unveiled earlier this month.

But the Repossessions Advice Centre has raised fears the code governing so-called sale-and-rent-back schemes might increase the number of homes being repossessed if the contents were not carefully considered.

Paul Fletcher, director of the advice centre, said the organisation supported the scheme and thought it would make a positive difference to an industry which has become potentially risky to homeowners.

Critics have attacked sale-and-rent-back schemes because a number of companies operating in the field have bought homes at prices well below market value and issued dubious rental agreements which had seen tenants forced out of their homes.

While the code aims to protect those vulnerable homeowners, the Repossessions Advice Centre, said the code should be carefully worded. Traditional advice for homeowners struggling with repayments is advice is to opt for sale-and-rent-back as a very last resort and that wherever possible they should try to remortgage their property.

Mr Fletcher said: "[The code] would help highlight the small print and potentially risky nature of these schemes, and could help vulnerable homeowners achieve the best price for their property.

"In a situation where a client is repossessed, their lender is legally obligated to achieve the best possible price on the open market for their property. This best practice should be emulated by companies within the sale-and-rent-back scheme sector

"However, a code would need to be carefully thought out as it could have the opposite effect and increase the number of repossessions rather than protect homeowners."