The study of 2,000 mortgage holders conducted by the Social Market Foundation (SMF) in February revealed 29 per cent had seen their household savings decline during the pandemic.
Based on figures from the Office for National Statistics (ONS) Wealth and Assets Survey carried out before the pandemic, SMF warned 770,000 already vulnerable households could be at risk of repossession when involuntary evictions resume and the final mortgage payment holidays end.
Those on lower incomes were also more likely to report a decline in savings with 46 per cent of mortgage holders on salaries up to £20,000 saying this was the case for them.
Government support and protection take-up
SMF called on the government to reform The Support for Mortgage Interest (SMI) scheme in the long-term to help struggling homeowners.
SMI was a grant which covered the interest payments of a mortgage, before it was turned into a loan in 2018. Currently, those on benefits including income support and jobseeker’s allowance can apply for the support but from 2024, mortgage holders will only be eligible if they are completely out of work.
Furthermore, the foundation said a time-limited hardship grant, similar to America’s Hardest Hit Fund, could be beneficial to homeowners as could allowing people to draw on their pension to boost their cash.
The Hardest Hit Fund offers payment assistance to unemployed or underemployed homeowners, a reduction of the mortgage loan or help for homeowners to move into more affordable properties.
SMF also said more could be done to improve the uptake of mortgage payment protection insurance.
Scott Corfe, research director at the Social Market Foundation, said: “It’s often observed that the pandemic public health restrictions have allowed many people to pocket extra savings.
“But our analysis shows this isn’t true for everyone and close to 800,000 homeowners could be at risk of losing their home during these turbulent economic times.”
Corfe added: “The government needs to prepare for a possible spike in evictions and repossessions, with many of society’s most vulnerable unable to keep paying their mortgage if they suffer a loss of income or lose their job.”
Paul Broadhead, head of mortgages and housing at the BSA, said: “There isn’t one single solution that will support all those in need.
“Stakeholders, including government and lenders, need to work together to ensure that homeowners and families, whether they’re dealing with temporary or longer lasting financial difficulties have the best chance of overcoming their difficulties and enjoy a home which is financially sustainable.”
He added: “I hope that the findings in this independent report will stimulate debate and that a range of flexible and compassionate options can be found to create positive futures for those whose prospects may currently feel pretty bleak.”