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CAB campaigns on sale and rent-back

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by Gill Montia

Mortgage borrowers are anxiously awaiting the Bank of England’s decision on interest rates this week and a much predicted rise to 6% is likely to lead to an increase in the level of home repossessions.

These have risen by 30% over the past 12 months and are at their highest since 2000.

The five base rate rises since August 2006 have resulted in personal debt reaching record levels the pressures on household finances may yet mount.

As a result, some schemes that offer people the chance to pay off debt whilst staying in their own homes, have been flourishing.

The Citizens Advice Bureau (CAB) is raising awareness of such schemes, which purchase property from people in debt and allow them to remain in their homes as a tenant, paying rent.

According to the CAB, some home owners who are a vulnerable state because of money worries are selling their homes at well below the market value – in some cases up to 65% below.

Companies operating such sale and rent-back agreements are typically offering a six-month assured short-term tenancy.

This means that the tenancy can be ended at any point with two months’ notice.

In addition, if the landlord buying the house defaults on the new mortgage on the property, repossession could leave the tenant (previously the property owner) homeless.

Sale and rent-back schemes are unregulated and the CAB is urging the Government to act now to prevent home owners in financial difficulties being exploited.

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News posted: September 4, 2007

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