What Happens if I Can’t Afford My Mortgage Anymore in Central London?

The last few years have seen increased financial pressures for people living in the UK, particularly for homeowners. Faced with the rising cost of living, including higher energy bills and higher mortgage interest rates, an increasing number of homeowners are struggling to afford their mortgages.

According to UK Finance, just over 90,000 homeowners were in mortgage arrears in the first quarter of 2025. The most common reasons for falling into mortgage arrears include a change in income, such as losing your job or hikes in mortgage interest rates.

Between 2016 and mid-2022, the Bank of England base rate remained below 2% and mortgage interest rates were more affordable compared to the higher rates over the last few years. For homeowners who took out a fixed rate mortgage in 2021, remortgaging to a new deal in 2024 or 2025 has meant taking on an interest rate 2-3% higher than they were previously on.

Owners of properties with bigger outstanding mortgages are feeling the pinch of mortgage interest rates increases to a higher degree. If you have purchased a high-value property in areas like Soho and Marylebone, where property values have consistently been much higher than the UK average, mortgage interest rises have an even bigger impact.

If you are struggling to pay your mortgage repayments for whatever reason, you have several options to consider. Read on for guidance on the next steps to take and the options available to you.

I Can’t Pay My Mortgage – What Do I Do?

Getting into mortgage arrears can have long-lasting financial implications, so the sooner you identify a solution, the better. Here are the steps to take:

1. Work out your budget

As a starting point you should conduct a full review of your finances. List all of your expenses and deduct it from your income to see how much the shortfall is. Look for any ways that you might be able to reduce your non-essential outgoings, for example, can you cancel gym memberships, subscriptions, expensive phone contracts etc.?

Once you have an accurate overview of your affordability, you will be in a better position to find the best solution for your circumstances. You should also explore any benefits you might be entitled to, such as Universal Credit. You might also be eligible for support for mortgage interest (SMI) if you are on certain benefits.

2. Contact your mortgage lender

Contact your lender as early as possible so that they are aware of your situation. Generally, mortgage lenders will want to avoid repossessing the property and will have some alternative options that may help prevent losing your home.

3. Check mortgage protection insurance

If you took out mortgage protection insurance, you may be able to claim to cover your mortgage payments. Check the terms to see if you are covered for your situation, as the cover is usually valid if you have lost your job or are unable to work through illness or injury.

4. Access free mortgage advice services

There are several free debt advice services that you can use to get confidential debt advice, such as Citizens Advice, National Debtline and StepChange. They will provide impartial advice regarding some of the most suitable options based on your situation.

5. Consider remortgaging

You may be able to remortgage your property to either extend the term or switch to a deal with lower interest rates. If you have built up equity in your property, you may be able to release some money to consolidate other debts. Extending your mortgage or releasing equity will mean that you pay more interest, so check the financial breakdowns before you go ahead with this.

6. Begin Repaying any existing arrears

If you are already in arrears, your mortgage lender will usually offer you a repayment plan to repay your arrears. Making payments as soon as you can, will reduce the impact on your credit score, as mortgage arrears will be recorded on your credit reports.

Ways To Deal With Mortgage Arrears

These are your potential options if you are in mortgage arrears:

1. Ask for mortgage ‘Forbearance’

Ask your mortgage lender whether they can grant mortgage forbearance, which is an agreement to suspend or reduce your mortgage payments for a set period of time. This could help for temporary financial issues, giving you time to find a new job, for example.

2. Get ‘mortgage modification’

Your mortgage lender may allow you to modify your mortgage, by extending the term to lower monthly payments. Another option they may facilitate is a short-term switch to an interest-only repayment structure to lower the monthly payments. You may be able to pay the interest on the loan without capital repayments for up to six months.

3. Refinance the home

You may have the option to refinance your home, which involves switching your mortgage to another lender, typically to use the equity in your property. This could provide you with a sum of money to help cover your mortgage payments, but you will then have a larger loan to repay.

4. Rent or sell the property

If the finance options we’ve listed are not available or you do not want to increase the term of your mortgage or increase the loan amount, the next option to consider is to either rent your property or put it on the market to sell. Renting the property will allow you to use rental income to cover the mortgage payments and you could then move back into the property at a point in time when your financial issues are resolved.

If you sell your home, the purchase can be used to pay the term of your mortgage. Selling your property can take anywhere between 3 to 9 months and you will be responsible for repaying the mortgage up until the sale goes through. Speak to your mortgage lender to check that you have permission to sell.

5. Short sale & Deed in Lieu of Foreclosure

In some cases where the property value is below the amount owed on the mortgage, the homeowner can sell the property to a third party with the permission of the mortgage lender. The lender may be prepared to write off the shortfall between the sale and the outstanding mortgage balance or they may still request a repayment of the shortfall.

If a short sale has not been possible, a deed in lieu of foreclosure is the next option. Under this agreement, the lender takes the deeds for the property in exchange for cancelling the mortgage debt. Again, the lender may still pursue recovery of the shortfall.

Assurances From The Government ‘Mortgage Charter’

The government introduced the Mortgage Charter to support homeowners facing financial difficulties due to rising mortgage interest rates. Lenders are signed up to the Mortgage Charter and offer support such as:

• Extending mortgage terms to spread your repayments over a longer period.
• Switching to interest-only mortgage repayments for six months.
• The option to lock-in a fixed rate mortgage deal up to six months before your current deal ends.

If you are experiencing financial difficulties and are unable to afford your mortgage repayments, taking early action will help to minimise the long-term impact on your finances and credit file. Achieving a quick sale or renting your property out may be a suitable option to resolve your problem.

And Finally

If you are looking to sell or rent your property in central London areas including Pimlico, Covent Garden or Bromley, we can help to find a buyer or tenant to relieve your financial pressures.

Book a valuation or get in touch to discuss renting your property out with our lettings team.