UK Home Repossessions Rise By Almost 50%
The number of homes repossessed by mortgage lenders in the UK has risen by 48% in the past year.
The Council of Mortgage Lenders (CML) said there were 18,900 repossessions in the six months to June, up from 12,800 in the same period last year.
The sharp rise was due to the economic slowdown making it harder for some homeowners to repay mortgages.
Repossessions have been rising since the second half of 2004 but have now begun to accelerate.
The number of mortgage holders behind with their payments has also gone up.
They rose by 29%, up from 120,800 in the first half of 2007 to 155,600 in the first half of this year.
The CML had previously predicted that repossessions this year would eventually rise to 45,000.
Its director general Michael Coogan said the latest figures were not a surprise, and are likely to get worse.
“While both have increased from their low base as expected, the overwhelming majority of the UK’s borrowers continue to pay their mortgages in full every month, and will continue to do so,” he said.
“The CML is sticking with its forecast of 45,000 total possessions and 170,000 mortgages in arrears of more than three months by the end of 2008.
“while on paper the figures look bleak these numbers remain extremely small when seen in the context of the 11.74 million mortgages in the UK,” he added.
Compared to the second half of 2007, the latest figures represent a rise of 41%.
The CML argues that sub-prime borrowers - those with poor or non-existent credit histories - have been the ones hardest hit by repossessions.
“In general terms, while arrears and possessions rates have risen across the industry, the impact of the credit crunch has hit the adverse credit sector harder than most of the mainstream market, which continues to perform well,” it said.
Caroline Flint, the housing minister, argued that people’s experiences now were nowhere near as bad as those in the last recession in the early 1990s.
“In the 1990s the problems people faced were high unemployment and high interest rates,” she said.
But shadow chief secretary to the Treasury, Philip Hammond, said the rising number of repossessions was down to the government’s “economic incompetence”.
“Faced with stagnant earnings, rocketing living costs and soaring mortgage bills, the weight of debt is taking its toll on thousands of hard-working Brits who stretched themselves to the limit to get on the property ladder, and are now finding they can no longer make ends meet,” he said.
The CML pointed out that 0.16% of all mortgages had been taken back by lenders in the first half of the year, up from 0.11% throughout the whole of 2007.
It said this rate was similar to that of the late 1990s, and was less than half the rate seen in the early 1990s.
Earlier this week the Financial Services Authority (FSA), warned lenders to treat their customers “fairly” if they were running into financial difficulty.
It said that repossession should be the very last resort if someone was having trouble repaying their home loan.
Homeowners facing repossession been warned not bury their heads in the sand.
Sue Edwards of the charity Citizens Advice said lenders were still being too aggressive.
“In too many cases lenders are still not doing everything they can to help borrowers in trouble, piling on extra charges, not negotiating with borrowers to come to a workable solution over repayment arrangements and preferring to use court action as a first rather than a last resort,” she said.
One of the most vigorous repossessors has been the now state owned the Northern Rock bank.
It revealed this week that its own repossessions had risen by 67% in the past year, from 2,215 to 3,710.
The Ministry of Justice will Next week publish figures on the number of repossession orders granted by the courts.
Normally these do not actually lead to someone losing their home because the courts are very reluctant to sanction eventual eviction.
Instead, borrowers usually come to some sort of arrangement with their lenders.
The last set of figures, published in March, showed that repossession orders in the first three months of the year were up by 17% on the first quarter of 2007, at 27,530.
FSA Issues Warning As Mortgage Arrears Rise
The UK’s financial watchdog has said Mortgage firms should treat customers fairly as the number of homeowners facing arrears and repossessions rises.
The Financial Services Authority’s comments came as it reported a 40% rise in new cases of repossessions in the first quarter of 2008 to 9,152.
In the same period the number of home loans in arrears rose by 15%.
The watchdog warned a flexible approach was needed from lenders when recovering these arrears.
“More people are struggling to meet their mortgage payments and it is vital that firms treat them fairly,” said Lesley Titcomb, of the FSA.
“This means paying attention to their individual circumstances and not repossessing their homes when there may be an alternative solution. Repossession should always be the last resort.”
Mortgage squeeze
The figures, drawn from data provided by regulated mortgage lenders and administrators, also gives more evidence of the squeeze on the availability of mortgages.
New lending peaked in the third quarter of 2007, but the share of new lending being used for loans for house purchases has fallen since then, the data shows.
The proportion of mortgages where homeowners borrowed more than 90% of a home’s value fell from a peak of 15% of new lending in 2007 to 10% in the first three months of 2008.
But the percentage of borrowers with a poor credit history has fallen.
“We believe these new figures paint a terrifying picture showing real people - hard-working families, young first-time buyers and even renters - all living in the shadow of repossession and ultimately homelessness,” said Adam Sampson of charity Shelter.
The FSA should tackle “merciless mortgage lenders”, he added, as there was concern that some lenders might try to pursue a repossession rather than try to work out a solution.
‘Fair treatment’
It is the first time that the FSA has published figures in this way.
It has asked specialist lenders not to operate a “one size fits all” approach that was too focussed on recovering arrears without taking account of the borrower’s circumstances.
It added that some were too quick to take court action and needed to improve training on dealing with mortgage arrears.
The watchdog also followed up on a review of 250 firms offering mortgage advice.
More evidence of whether customers were able to afford repayments was needed, the FSA found.
Seven small mortgage advisers are also likely to face enforcement action after the review.
Repossessions
The Council of Mortgage Lenders (CML) says that there are 11.8 million mortgages in the UK that are currently being paid off.
However, it has predicted that, with more of us feeling the pinch due to the credit crunch, there will be 45,000 repossessions in 2008, up from 27,100 in the previous year.
The growing numbers are partly the result of rising house prices in recent years, which gave lenders an interest in encouraging people to sell.
With high mortgage repayments, and rising household food and fuel bills, the number of people missing payments on their home loans is rising.
The Ministry of Justice said in May that the number of people facing repossession orders - an early stage of the repossession process - rose by 17% in the first quarter of the year.
There were 27,530 orders in the quarter, up from 23,438 during the same period in 2007.
The government said it was doing more to help those in financial trouble, such as extending free debt advice services and free legal representation at county courts.
“The rate of repossessions is not on the same scale as in early 90s. But that doesn’t mean we don’t recognise the problems that some borrowers are facing because of global economic pressures,” said a Department for Communities and Local Government spokesman.
There was also some better news for new borrowers as a number of the major lenders have also cut their interest rates for new fixed-rate mortgages in recent days.
