Repossessions likely to spike in 2010
With many homeowners struggling to meet their mortgage repayments, it is hardly surprising to see that repossessions are still high, with around 46,000 in 2009, according to the Council of Mortgage Lenders (CML). Read news story here
But I think the real number could be even higher. Although I’m sure the statistics are collected correctly, in my view they do not accurately reflect current market conditions.
Ultimately, I believe the problem is far greater than it appears and the figures are likely to be nearer to those of the last big house recession, back in 1991 when 76,100 homes were repossessed.
For a start, these figures do not take into account the number of homes being sold by families to private landlords, under sale and rent back schemes.
I estimate that the number of homes sold under these schemes was close to the 25,000 mark last year.
Another factor is that the CML only collects the number of mortgaged properties that are repossessed. There are no records of how many properties with second-charge loans secured against them.
What is more, the introduction of the mortgage pre-action protocol in 2008 – which and sets out the steps lenders must take before applying for repossession - could be a delaying factor in eventual repossession for some homeowners.
I also think repossessions will increase quite significantly going forward. The latest annual Moore Blatch 2010 repossessions report reveals that 67% of mortgage lenders and repossession experts also forecast an increase in repossessions this year.
While lenders have had to help borrowers struggling with repayments rather than rush to reposses, they can only hold out for so long – as Paul Walshe, head of lender services at Moore Blatch points out, the scheme has created a “bottleneck which will start to clear in 2010”.
It can take between six and 12 months to have a home repossessed, but at the moment it takes even longer because of the various government-backed schemes. So, the most recent figures released are based upon borrowers who experienced difficulty around a year ago.
Homeowners who miss their first payment this month are unlikely to show up in figures until the very end of this year - if not 2011.
The low cost of standard variable rate mortgages at the moment is good news for homeowners, especially those who are overpaying each month to reduce their mortgage debt.
But what happens when the Bank of England base rate starts to rise? They will see repayments go up, and if the money isn’t there to pay…
I do not accept that the house repossessions are falling; once you clear the smoke and look through the mirrors then you can’t help feel that someone has been spinning a good yarn.
A homeowner’s worst nightmare; repossession is an action of last resort by mortgage lenders to recover money from borrowers that have failed to keep up with repayments on their mortgage or other loan secured on their home (see secured loan). Repossession is a legal procedure that has to go through several processes before the homeowner is evicted and the property reposed. These are: if a borrower keeps defaulting; the lender applies for a solicitor’s notice; the lender instigates possession proceedings through the court; at the court hearing a possession order is granted and sometimes a possession warrant; a bailiff is appointed and an eviction notice issued at which point the homeowner has two to three weeks to vacate the property.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.