Repossession fears loom large
With the latest repossession figures imminent, Barney McCarthy takes a look at what to expect
You only have to pick up a paper or watch the news at the moment to know that a storm is brewing. The well-publicised Northern Rock debacle and the ongoing credit crunch continue to garner plenty of column inches, housing prices are starting to cool and the pessimists among us are sure that Britain is lurching towards recession. But perhaps more of a concern than first-time buyers struggling to get onto the property ladder, is those who are already on it having difficulty with their monthly mortgage repayments and staring down the barrel of the repossession gun.
Examining the figures
Trade body the Council of Mortgage Lenders (CML) issues arrears and repossession figures twice annually, in February and August. Last summer’s figures showed a 30% increase from August 2006, with an estimated 14,000 properties repossessed in the first six months of 2007. But while the number of people losing their homes rose, the number of mortgages in arrears – people missing monthly repayments – had fallen by 3%. CML director-general Michael Coogan said at the time that higher UK interest rates and the expanding sub-prime mortgage market were key factors in more people losing their homes.
While the Bank of England Base Rate has fallen since then and a further cut is widely expected in February, what is worrying is that the credit crunch only really hit after the last figures were released, so there is every reason to expect similarly stark results – if not worse – this time round. City watchdog the Financial Services Authority this week published its Financial Risk Outlook for 2008 and said it expects to see an increase in repossessions as economic conditions deteriorate. The regulator expressed particular concern about consumers borrowing more than 90% of the property’s value and those over-stretching themselves with high income multiples.
Gloomy omens
The Royal Institution of Chartered Surveyors (RICS) this week published an accessibility index detailing the problems facing first-time buyers in the current market. Given the report’s findings on affordability, RICS predicted that “repossession levels are set to continue to rise, with 123 houses a day expected to be repossessed in 2008”. Another sign that repossessions are on the increase is the record number of repossessed homes going under the hammer at property auctions. Allsop, one of Europe’s biggest residential property auctioneers, published its February catalogue earlier in the week, listing 410 lots over two days. Banks or mortgage lenders are offering nearly 40% of these lots as distressed sales.
Allsop says that similar conditions haven’t been seen since the early 1990s and that the percentage of repossessed properties has doubled since the same time last year. It also warns that a large proportion of the lots on offer are former investment properties and that not all of the recent breed of property investors have fully appreciated the pitfalls involved.
With a lot of people coming to the end of two-, three- and five-year fixed-rate mortgages taken out when interest rates were more favourable, the ‘payment shock’ of significantly increased monthly repayments will undoubtedly lead to a tightening of belts across the UK. Coupled with the ongoing credit squeeze and lenders being more particular with their criteria, it is perhaps to be expected that the latest repossession figures will show another increase.
If you are having problems with making your monthly mortgage payments, go to your lender at the first sign of trouble to attempt to work out a solution. You can take heart from the fact that many mortgage possession claims do not end with the property being repossessed, often because the borrower presents the court with a case for not proceeding or the lender comes to an arrangement with the borrower.
Tags: Interest rates, Mortgage news, Mortgage payments, mortgages, News, Repossession
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