The repossession figures don't tell the full story
I’m not challenging the repossession numbers that the Council of Mortgage Lenders (CML) and Ministry of Justice (MoJ) put out but they seem to suggest that the situation is under control when in my view it isn’t.
Am I the only one thinking like this? Do I have something here?
These numbers are not giving a true reflection of current market conditions. Why?
My reasons are as follows:
• It takes between six and 12 months to have a home repossessed - and the figures released are based upon householders who experienced difficulty up to almost a year ago.
• The CML is only collecting the number of people with mortgages, and there is no record of how many people with second-charge loans (secured loans) are being repossessed.
• The introduction of the mortgage pre-action protocol last year could be delaying what will be eventual repossession for some homeowners.
But my main concern is the fact that these figures do not include the number of homes being sold by families to private landlords under sale and rent back schemes.
Just to clarify, sale and rent back schemes are often taken out by homeowners as a last ditch attempt to ward off repossession. The seller then usually remains in the property (although this will be owned by someone else) paying rent and effectively becoming just a tenant.
The Financial Services Authority (FSA) estimates that some 50,000 homes have been sold under sale and rent back schemes over the past few years, with up to half of these sold in 2008 alone. No one knows what the figure will be for this year.
Sale and rent back was not an option back in 1991 - when 76,000 homes were repossessed.
The CML estimates there will only be 48,000 repossessions in 2009 as a whole - but I believe that, taking sale and rent back properties into account (assuming these homes would have been otherwise repossessed) it is likely to be nearer 85,000 homes, making it higher than those figures back in 1991.
Looking forward, with unemployment expected to reach 2.5 million by the end of the year, this will only add to the number of people repossessed.
Exceptionally low interest rates are helping to keep mortgage payments down and some people are using redundancy payments or credit cards to meet their mortgage commitments.
However with interest rates so low that they can only go up, and unemployment still rising, many families will continue to struggle. This is just a time bomb waiting to explode.
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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.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.