Home repossession orders rise
The number of homeowners faced with losing their homes after not meeting their mortgage payments has risen by 24% in the second quarter of 2008.
According to the Ministry of Justice, 28,568 court orders were made for mortgage repossessions between April and June, a 24% increase on the same period last year.
The figure is 4% higher than the first quarter of this year, when a total of 27, 515 court orders were made, suggesting that even more cash-strapped homeowners are struggling to cope with the rising costs of living.
The Council of Mortgage Lenders reported that in the first three months of 2008 a total of 18,900 homes were repossessed - the highest level in over 12 years. The figures are lower because court orders are granted in the early stage of the repossession process, and may not result in homeowners losing their home. Possession proceedings can be abandoned if a satisfactory repayment plan can be agreed between both householder and lender.
Adam Sampson, chief executive of homelessness charity Shelter, says that the repossession figures could be just the ‘thin end of the wedge’, as new Shelter figures show the proportion of people coming to the charity for help with mortgage possession actions over the past six months has increased by 55%.
"Every day Shelter is seeing more and more ordinary hardworking people who are terrified of losing their homes,” he said. “They’re being punished by rising household bills, escalating fuel charges and food prices that are going through the roof. Tens of thousands are living with the fear of having the home they’ve worked so hard for being repossessed by lenders with little compassion."
However Peter Williams, the executive director of the Intermediary Mortgage Lenders Association, believes that mortgage lenders are doing all they can to keep people in their homes. “Possessions only occur as a last resort – mainly to save a borrower from piling up more debt by going heavily into arrears. Lenders are already working hard to keep borrowers in their homes by rescheduling loans and payments, assisting moves and offering advice. But sometimes, unfortunately, possessions are the best solution for everyone involved.”
David Hollingworth, a mortgage broker at London & Country, urges any borrower having difficulty paying their mortgage to contact their lender immediately. “Opening up some form of dialogue with your lender if you are starting to struggle is vital. Your lender can help work out a plan to keep you on track and avoid repossession.”
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.