Alex Murray of national adviser network Thinc Group stated: ‘This is not the start of a new dawn. Massive supply problems remain.’ He added that until stability was restored to the wholesale mortgage market conditions would continue to get worse, and the shortage when it comes to mortgage supplies would continue. This would impact on the downward pressure on house prices and make it increasingly difficult for consumers to get their hands on affordable mortgages.

Another broker agreed, stating that whilst some lenders were starting to provide finance again it was only based on safe lending, where borrowers have a high deposit to put down and a fairly good credit report. He said: ‘Certain lenders appear to be jockeying again to expand their market, but only where very safe lending is concerned.’

The potential suspension of stamp duty in the meantime continues to impact on the level of housing sales, and one official said: ‘With the Chancellor’s confirmation that he is considering a temporary suspension of stamp duty, housing transactions will diminish further until he sets out his proposals. Who will want to commit to a property purchase now when it is probable that by waiting a few months they could save thousands of pounds?’

The first step to avoiding repossession is to be realistic about your monthly income and to plan your household budget carefully to ensure enough money is available to meet your needs. You need to be absolutely honest about your outgoings and make sure you consider all possible expenses, including the following:

• Mortgage or rent
• Council Tax and all utility bills (telephone, gas, electric etc)
• Food and Drink
• Life, home and personal insurance
• Motoring/Travel (including petrol, insurance tax etc)
• Loan/Credit Cards repayments
• Household maintenance
• Clothing
• Toiletries and medicines
• Leisure Activities
• Other (mobile phones, TV license etc)

When working out your budget allocations, make sure that repayments for loans, mortgages and credit cards can be met comfortably, as missing these payments can incur heavy charges and in the case of secured loans could lead to your home being repossessed. If you cannot meet these expenses, then you need to reassess your current spending and look for areas where you can cut back and make savings. Shop around for better deals on services such as insurance, gas, and electric. Think about reducing budgets for luxury items and leisure activities, and also look at where you can make savings on food and drink shopping.

If you are struggling to meet your monthly outgoings then there are many advice agencies authorized by the FSA, which can help you understand your financial situation, and deal with any debt repayment problems. Also you must contact your lender if you find yourself in the position where you cannot meet a repayment on your mortgage. Some lenders can offer deferments on payments for up to 6 months, which can be helpful during difficult or financially unsettling times.

Also you can protect against repossession by taking out insurance, such as ‘Payment Protection Insurance’ (PPI). This will cover monthly repayments on mortgages, loans and credit cards if you have an accident and are unable to work, or if you become suddenly unemployed. Or you could take out ‘Income Protection Insurance’ (IPI), which will replace part or all of your monthly income if you are too injured or ill to work, and stop receiving your usual earnings. If you are considering taking out PPI or IPI insurance make sure you shop around and examine policies thoroughly, to ensure you are getting the best cover to suit your individual circumstances.

Another option to avoid repossession is to sell and rent back your property. This is most likely to be your biggest asset and in some financial circumstances releasing the capital from this asset may be a way of preventing repossession in the face of unmanageable debt. In a ‘sell and rent back’ deal you would have to sell your property outright to a relevant investment company, and then you would stay in the property and rent it back from them. This means you will not have to move or leave your home, and the company will handle the property sale and rental details on your behalf. Make sure you look at all the “sell and rent back” deals available, and choose the package that is best for your individual financial situation. Some companies do offer more money for properties outright, but then the rent could be higher than you may be able to afford in the long term.

Many people believe that if this happened to them their mortgage company would be sympathetic and take into account the loss of earnings. Unfortunately, especially in the current economic climate, mortgage companies are very quick to jump on overdue payments and will always push for eventual repossession of homes.

So what can home owners do to protect against such an eventuality? A Critical Illness Cover policy can pay out a lump sum amount in the event that you suffer from one of a list of so called critical illnesses. These include conditions such as heart attacks, advanced cancers and strokes, plus a long list of more obscure conditions.

The payout from a Critical Illness policy can be then used by the homeowner in a variety of ways such as keeping up to mortgage payments, paying for medical expenses or even paying of their mortgage. They are designed to provide a safety net at a time when the last thing on your mind is paying your mortgage.