Home repossessions soar 41%
Home repossessions increased by 41% in the first three months of the year as more households failed to meet their monthly mortgage repayments, official figures have shown.
According to figures from the Financial Services Authority (FSA), there were 9,152 repossessions in the first quarter of 2008, compared with 6,471 in the same period of last year.
And the number of those in arrears on their mortgage repayments for three months or more is even higher, with the FSA revealing that over 300,000 people have been unable to make the full repayment – an increase of 15% compared with the first quarter of 2007.
The FSA’s figures come as the nationalised bank Northern Rock, which at one time used to loan over 100% of the value of a house, revealed that it had repossessed 3,710 homes over the past year from customers struggling to make their mortgage repayments. The bank has also increased the number of debt management staff from 185 to 500.
However, the FSA believes that lenders are far too strict with cash-strapped homeowners unable to make their mortgage repayments, and are often far too quick to seize their properties. The watchdog has called on lenders to be more flexible with borrowers to help them stay in their homes.
Lesley Titcomb, FSA director responsible for the mortgage sector, said: "More people are struggling to meet their mortgage payments and it is vital that firms treat them fairly. This means paying attention to their individual circumstances and not repossessing their homes when there may be an alternative solution. Repossession has to be the last resort."
This view is echoed by Sue Edwards, head of consumer policy at Citizens Advice. “We call on the government to introduce a mortgage pre-action protocol as soon as possible to ensure that lenders only take possession action as a last resort,” she says. “In the meantime it is vital that lenders treat their customers fairly and sympathetically and consider alternative options to ensure that repossession is the last step.”
The Council of Mortgage Lenders (CML) expects the number of repossessions to rise to 45,000 by the end of the year. However, most analysts believe that it will be much higher than this as these figures do not include second charge mortgages – which is an additional loan taken out on a home.
The homelessness charity Shelter predicts that an additional 9,000 borrowers will be repossessed due to second-charge lenders. “These figures paint a terrifying picture of people are all living in the shadow of repossession and ultimately homelessness,” says chief executive of Shelter Adam Sampson.
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.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.