Little surprise in arrears and repossession numbers
The latest data from the Council of Mortgage Lenders (CML) shows that, despite the slowing economy, the majority of homeowners continue to meet their full mortgage repayments every month.
Numbers of mortgage arrears and repossessions were up year-on-year, but the CML maintains that "these numbers remain extremely small...in the context of the 11.74 million mortgages in the UK". This data from the CML applies to first mortgages only, ignoring any other consumer loans on people's homes.
In the first half of 2008, there were 18,900 instances of lenders taking repossession of property - increasing from 13,400 in the second half of 2007 and 12,800 in the first half of 2007. Although the repossession rate (the proportion of all mortgages on which repossession takes place) is at similar a level to the late-1990s, the figures are still some way off - less than half - the rate of the early-1990s, when the UK last saw a recession.
With regard to arrears, the total number of households with three months or more of arrears stood at 155,600 at the end of the first half of 2008 - an increase of almost 35,000 from the same period last year.
CML director general, Michael Coogan, believes that the numbers need to be kept in "perspective" given the ongoing impact of the credit crunch. "The good news is that most people are coping well and continuing to pay their mortgages in full," he says.
However, he warns of potentially tougher times ahead: "It is inevitable that more borrowers' coping strategies will come under pressure in current conditions than in the unusually benign years of the last decade.
"[But] no-one wants to see a household lose their home, and repossession typically leads to a loss for the lender as well."
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.
“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.