Against many analysts' expectations, Britain remains deeply entrenched in recession, with all the woe that brings for job prospects and family incomes. Lenders may have promised to be sympathetic to those behind with their mortgage payments, but there are still thousands of homeowners up and down the country facing the possibility of losing their homes. Where do they turn?
Against this backdrop, Shelter, the homelessness charity, warns that much-criticised sale-and-rent-back schemes are raising their heads again, with many still not covered by Financial Services Authority rules to prevent consumers being ripped-off.
The schemes will buy the properties of those unable to meet mortgage repayments, but allow them to remain as tenants, paying rent to the purchasing firm. The catch is that the scheme providers sometimes pay as little of 60 per cent of the property's true worth, but offer the carrot of a quick sale.
"If people aren't paying their mortgages, their lenders will kick them out," says Steve Williams, managing director of long-established sale-and-rent-back provider National Property Buyers, which has led the way in agreeing to industry regulation. "Some people get in a financial predicament and this is a way out of it, but it doesn't suit everybody."
These schemes provide a way out of mortgage arrears for homeowners while enabling them to stay in their homes. But, say charities and housing campaigners, some companies use the opportunity to exploit people.
"They offer to take the worry away but keep people in their homes," says Kay Boycott, the head of communications at Shelter. "But the valuation would be much less, so people were losing money on their homes. Then, after six months under the assured shorthold tenancy rules, they would be given notice to quit, or their rents were forced up."
The unscrupulous tactics used by some sale-and-rent-back providers begin with aggressive sales techniques. In some instances, cold-calling salesmen would urge people to sign contracts on the spot, with no cooling-off period. If tenants were fortunate enough to avoid eviction, they could face sharp rises in rent, leading to a stark choice – pay more or leave the family home. Providers also often threw in high administration and surveyors' fees.
Recently, there have been problems with the scheme providers themselves being unable to meet loan repayments and, in these cases, the tenants have no rights and will be evicted should the property be repossessed. "If you delved deep into some of these cases you'd find all sorts of stuff going on," says Ms Boycott.
As a result of these concerns, the FSA stepped in over the summer with interim rules governing sale and rent back. In particular, the FSA wants providers to make it clear to consumers that free debt advice is available, and to be more transparent about the value they place on the property being sold and the tenancy agreement.
So far, 78 firms have agreed to comply with the FSA rules, but Shelter says there are those that are adopting a "wait and see" policy over whether they will comply or not. Disturbingly, the Office of Fair Trading in a report issued last year identified up to 1,000 sale-and-rent-back providers in Britain. In response, the FSA has said that firms will have to sign up to its rules by June 2010 or leave the industry. But Shelter's investigation of the market shows that many firms which are failing to comply with the new rules are still advertising for new customers.
It is important to explore all other avenues before you consider a sale-and- rent-back scheme. "If you are having serious difficulties paying your mortgage, you should seek free, independent advice to help you understand if the sale-and-rent-back scheme is right for you," says Sue Edwards, the head of consumer policy for the Citizens Advice Bureau.
Most debt charities will tell you the first port of call is your lender, but too often people in debt difficulty choose to ignore the problem until they are well into the repossession process.
Banks are being encouraged to be more flexible with those struggling to repay their mortgages, which has hit the uptake of sale-and-rent-back schemes. "We have seen a drop-off in business because lenders are being more flexible," says Mr Williams, "but they won't hold fire forever because they aren't social companies, they are businesses."
The popularity of sale-and-rent-back schemes has also taken a knock from falling house prices, which have left many people in negative equity. An offer at 60 per cent of the property's value is underwhelming, but if your mortgage is 110 per cent of the value of your house, your outstanding debt if you sell the property would still be considerable.
However, it can work for some. "Sale-and-rent-back is a genuine way to help people stay in their homes as long as they get a fair financial deal for it," says Ms Boycott. The key advice is to get several quotes and, crucially, only go with a provider which has signed up to the FSA rules. "But first, people should see if they are eligible for the government-funded mortgage rescue scheme," she adds.
This scheme can either help those struggling with arrears by providing a loan to reduce monthly payments, or, in some cases, the local authority will buy your home for 97 per cent of its value and then rent it back to you at 20 per cent less than the market rate in your area. These schemes can provide essential support, but the criteria are stringent. To qualify, your household must include someone in "priority need" – a pregnant woman, dependent children, or the elderly, infirm or mentally impaired. Your household income cannot exceed £60,000, and the value of your home cannot be higher than certain levels set according to the region you live in. Finally, the loans secured against your property must be less than 120 per cent of its value.