At the moment homeowners need to be six months behind their mortgage payments before repossession proceedings can begin, but a new EU directive which is currently going through European Parliament could change all this. If it is brought into law, lenders in Britain would be forced to begin repossession proceedings once borrowers fall just three months behind their mortgage payments. This would increase the risk of default, which in turn would increase banks’ lending costs. These extra costs will of course be passed on to homeowners, and there is the worry that it could affect mortgage availability.

The EU is keen to bring in this new directive in order to reduce the risk of suffering from another financial crisis as it would make lending safer. It will also mean a restriction on the amount of time banks are currently given to help restructure mortgage payments in order to help homeowners from defaulting. The new directive would be unlikely to have much effect on other EU member states as most regard homeowners who have fallen behind on mortgage payments for 90 days or more as being in default. There are worries that this could become law as early as next year. At the moment just 1.2% of mortgages are in arrears, so the effect may be quite limited, but if all those homes were to be repossessed, obviously people would need to be rehoused elsewhere, and while this might create greater demand for rental property in Nottingham, more expensive borrowing would not be good for the housing market recovery.