Home repossessions up 71%
The number of people losing their homes because they are unable to keep up with payments has risen sharply, with a 71% increase in possessions since last year.
Figures from the Financial Services Authority (FSA) show that although the number of people missing payments for the first time has remained consistent since early 2007, more homeowners are struggling to clear their arrears. At the end of June 2008 there were 312,000 mortgages in arrears, up 16% since the previous year. The total amount of arrears now stands at £1.6 billion.
Between March and June this year, 11.054 more possession orders were made by banks on mortgages that had fallen into arrears. A possession is where a lender, having been granted a possession order by a Court, is able to sell the property and use the proceeds to reduce or pay-off the debt.
The figures come as the Bank of England warns that 500,000 more people face losing their home as a result of tighter household budgets coupled with falling house prices. It also warned that 1.2 million homeowners will go into negative equity (where the amount you owe on your mortgage exceeds the value of the property) if house price falls continue.
The Land Registry reports that annual house prices in England and Wales fell by 8% in September to prices last seen in autumn 2006. The average house price is now £168,814, while in London the average price is £328,927.
The circumstances in which a property is worth less than the outstanding mortgage debt secured on it. Although it traps householders in their properties, the Council of Mortgage Lenders (CML) says there is no causal link between negative equity and mortgage repayment problems. At the depth of the last housing market recession in 1993, the CML estimated 1.5 million UK households had negative equity but most homeowners sat tight, continued to pay their mortgages and eventually recovered their equity position.
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.