Home repossessions continue to rise
The number of people whose homes were repossessed by their lenders jumped by 40,000 last year.
Although this is 5,000 fewer than expected, the Council of Mortgage Lenders (CML), which compiled the figures, says that one in 290 mortgages are now being repossessed. And it expects the number to increase going forward.
Around one in 53 mortgages is now more than three months in arrears. With increasing numbers of people losing their jobs, more people are expected to struggle to meet their mortgage payments in 2009.
The CML estimates that 75,000 homes will be repossession in 2009 – despite a commitment from lenders to do more to help people stay in their homes.
Michael Coogan, director general at the CML, says the lower-than-expected repossession figures prove that lenders are making efforts to ensure that repossession is a last resort.
He also claims that there has been an increase in the number of people willingly giving up their homes, perhaps to escape the pressure of payments.
“There seems to be a sharp rise in cases where borrowers are handing back their keys or abandoning their properties,” says Coogan. “We strongly urge borrowers to contact their lender and work with them before taking this step, as there may be other solutions.
"Borrowers are still liable for their debt, even if they leave the property, so working through their problems is much more likely to be in their best interests."
Measures to protect homeowners:
* The Homeowner Mortgage Support Scheme that, although not yet launched, aims to allow lenders to offer struggling homeowners help such as lower monthly payments or even payment breaks. This scheme is due launch in April.
* Changes to Income Support for Mortgage Interest mean eligible people can start to receive benefits after three months rather than the previous nine months wait.
* The government's mortgage rescue scheme enables housing associations to either buy a share in the property from the homeowner or buy it outright, allowing the occupant to rent it back. This is for "priority" households only, such as those that include dependant children, an elderly person, or someone with a disability.
* Some local authorities have initiatives in place that help give local homeowners “breathing space” through short-term difficulties.
Are these measures enough?
The government's Homeowner Mortgage Support Scheme, which was announced by Gordon Brown back in December 2008, will not come into force until April this year.
In the meantime, many households continue to struggle with repayments.
Bev Budsworth, managing director of The Debt Advisor, says lenders must be even more flexible when it comes to dealing with struggling homeowners.
“My advice to anyone that is struggling to pay their mortgage is to talk to their creditors at the first sign of trouble," she adds. "People shouldn’t bury their head in the sand as the problem will not simply go away if it’s ignored. Homeowners shouldn’t hand the keys back to the lenders without talking and negotiating with them first – repossession should only be a last resort."
And even when the scheme eventually launches, there are fears in won't be enough.
Ed Stansfield, property economist at Capital Economics, believes that any benefit of government initiative to help struggling homeowners will be wiped out by rising unemployment.
"Despite the raft of government initiatives aimed at supporting homeowners in difficulties, we remain concerned that the economic backdrop will inevitably push possessions back up to, or perhaps, beyond their previous 1991 highs.
"In short, mortgage possessions remain on course to match, or possibly exceed, their previous peak of 75,500 seen in 1991."
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.