Homeowners will be protected from repossession under tighter laws that will make it compulsory for lenders to go through the courts before they can sell customers’ homes.
Two sets of figures published today show that both the number of people losing their homes to repossession, and the number of possession claims made by lenders to the courts, have fallen over the summer and autumn months.
Alongside these figures, the government says it wants to tighten the law so that no lender can sell the home a borrower lives in against their wishes without first going through the court process.
This will help them take advantage of the help offered through the courts, says courts minister Bridget Prentice.
|The mortgage pre-action protocol, which was introduced in November 2008 and sets out the steps lenders must take before applying for repossession|
|The income support mortgage interest scheme, which assists certain homeowners with their interest payments|
|The homeowner mortgage support scheme, which enables some borrowers to reduce their monthly mortgage interest payments to affordable levels for up to two years|
|The mortgage rescue scheme, aimed at vulnerable households facing the immediate threat of repossession|
|The housing possession court duty scheme, which provides legal advisers to anyone – regardless of income|
According to the Ministry of Justice, the number of mortgage possession claims made by lenders dropped by 7% between July and October, from 26,213 during the previous three months to 24,337. This figure is 37% lower than the number of claims made in the same period last year.
Meanwhile, the number of people losing their homes to repossession has slowed significantly, leading to mortgage lenders cutting their overall repossession expectations.
The Council of Mortgage Lenders (CML) previously anticipated that there would be 75,000 repossessions during 2009 as a whole, but in June it revised this down to 65,000. However, it now believes there will be 48,000 repossessions during the year, compared to 40,000 in 2008 and 25,900 in 2007.
The CML’s figures show that 11,700 properties were taken into possession by lenders between June and September, up slightly from 11,400 during the previous three-month period. This is admittedly up 5% from the same period last year, but compares favourably with the 12,700 repossessions seen in the first quarter of 2009.
Next year is likely to see around 53,000 repossessions.
"Low interest rates, and lenders' forbearance policies, have helped to cushion many households facing financial problems,” says Michael Coogan, director general of the CML. “And although the economy is not out of the woods yet, we no longer expect a dramatic rise in properties being taken into possession unless interest rates rise from the low levels that most commentators now expect to persist for some time.”
The number of borrowers missing repayments has also fallen. At the end of September there were 194,600 mortgages in arrears, accounting for 1.77% of the total number of outstanding mortgage loans. In comparison, there were 204,200 cases - 1.86% of all mortgages – in arrears at the end of June.
The CML predicts that 195,000 will be in arrears by the end of the year, rising to 205,000 in 2010.
Coogan adds: “It is difficult to see the case for a dramatic upturn [in the housing market] in the absence of significant improvement in the wider economic picture. There is a risk that public spending cuts and higher taxes could choke off recovery.”
The organisation expects there to be 810,000 housing transactions in 2009 as a whole, rising only slightly to 850,000 next year.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, says: "It now looks likely that the number of properties taken into possession over the whole of 2009 will be in the region of 40,000 which is significantly lower than the expectations earlier this year.
"Such an outcome would be similar to the number of repossessions in 2008 and way down on the high of more than 75,000 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.