Redundancy

Levels of unemployment are soaring as companies are forced to cut jobs due to the economic crisis. Official government figures revealed that the number of people out of work in the UK in early 2009 totalled 2.03 million – this is the first time since 1997 that the figures has risen above 2 million and many economists expect it to continue rising.

Losing your job can have a sizeable impact on your financial situation and may result in you struggling to meet the repayments on your mortgage and other debts.  The Council of Mortgage Lenders predicts that the number of households more than 3 months in arrears will jump from 219,000 in 2008, to 500,000 by the end of 2009, which in turn is likely to lead to more repossessions.

Lenders and debt advice agencies are calling on borrowers in trouble to take early action to help themselves:

How to get out of trouble:

• Contact your lender – the earlier the better. Your lender will work with you to try and find a repayment solution. They may be able to lengthen the mortgage term, add arrears to your outstanding debt, switch to an interest-only basis, temporarily reduce your payments or change the date and method of payment.
• Check to see if you are eligible for assistance. Are your payments covered by an insurance policy? Are you eligible for help towards the mortgage through the benefits system?

How to stay out of trouble:

• Prioritise your debts – if you don’t pay your mortgage you risk losing your home so pay your mortgage before any unsecured debts such as credit cards.
• Make overpayments on your mortgage if you can afford it.
• See if you can reduce your mortgage payments by getting a better interest rate.

Redundancy Pay

The law sets out the minimum payment you can expect to receive if you are made redundant. To be entitled to this legal minimum you must have:
• Worked continuously for at least two years for your employer (time you have taken off for maternity or parental leave is included)
• Be an employee
 
How much redundancy pay are you entitled to?

• Half a weeks pay for each year of employment up to the age of 21
• One weeks pay for each year of employment between the ages of 22 and 40
• One and half week’s pay for each year of employment over the age of 41.

To find out more, go to http://www.tuc.org.uk/tuc/rights_redundancy.cfm

What you can do

Check whether you have insurance in these circumstances. You may have taken it out when you got your mortgage. It’s normally called Mortgage Payment Protection Insurance (MPPI). A typical policy will start to pay your mortgage repayments one month after your income stops due to redundancy, accident or illness, and continues to pay for 12 months.