Sharp rise in missed mortgage payments
An alarming 377,000 mortgage borrowers are currently in arrears on their loans, data from the financial regulator reveals.
The Financial Services Authority (FSA) says that the total number of mortgages accounts in arrears has been steadily increasing since early 2007, jumping 31% throughout 2008 to hit 377,000 by December. In the last three months of the year alone, 68,000 borrowers missed payments on their loans.
As a result, the number of new possessions also grew significantly, with a 46,750 new cases recorded in 2008. In the last three months of the year, there was a 60% increase in new possession cases, the FSA reports.
Meanwhile, government data shows that house prices rose in January by 0.2%. This corresponds to data from mortgage lender Halifax; its house price index reported a 1.9% increase in house prices in January, offsetting the 1.6% fall in December. The bank said that although house prices were still more than 17% lower than January 2008, the rise was the first increase in property values for 15 months.
However, historically house prices have not moved in the same direction month-after-month even during a pronounced downturn.
Seema Shad, property economist at Capital Economics, says the house market “correction” still has a way to go, and house prices are likely to continue to fall throughout 2009.
“The economic news flow does not bode well for the housing market,” she explains. “Job losses are soaring, confidence is at rock-bottom and lending criteria are unlikely to be materially. In addition, house prices remain overvalued. Accordingly, we still believe that the floor for house prices remains a long way off.”
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.