So its official then, the Council of Mortgage Lenders (CML) says that only 36,300 homes were repossessed throughout 2010, a drop of 24% on the year before. That's close to half the number of homes that were taken back by lenders in 1993. So what's the problem?
The problem is, in my opinion, that although the statistics are collected correctly by the CML they do not accurately reflect current market conditions and the situation is far different to how it appears. Here are my thoughts.
The impact of 'Sale and Rent Back' Schemes
The first area to look at is the number of homes being sold by families to private landlords, under 'Sale and Rent back' (SAR) schemes, or flash sales. These schemes weren't around in 1991 at the height of the last repossession crisis when around 76,100 homes were repossessed.
Back in October 2008, The Office of Fair Trading (OFT) said, "It is likely that there are upwards of 1,000 firms, together with an unknown number of non-professional landlords, who have conducted about 50,000 transactions to date". That was well over two years ago!
Since that announcement the SAR industry has gathered momentum leading to the intervention of the Financial Services Authority (FSA) and full regulation being implemented last July, rightly so in my opinion.
Based on the OFT figures and on increasing consumer awareness of the SAR scheme I estimate that the number of homes sold under SAR in 2010 could be as many as 20,000.
Only first charge holders are recorded in the figures
Another damning factor is that the CML only collects the number of first charge holder repossessions, this is the main mortgage. There is no record of how many second charge holders, usually secured loans, who are repossessing homes. How many are there of these that the CML do not know about?
The effect of the Mortgage Pre-action Protocol
We haven't even thought about how the introduction of the Mortgage Pre-action Protocol back in 2008 could be a delaying factor in eventual repossession for some home owners. Some of these schemes just delay the inevitable and add further debt through delayed payments.
CML uses old data to make the repossession figures
All these aside I now have another argument to put to you; that the data put out by the CML is technically out of date as they can only record repossessions that were finalised during the year. It can take between six and 12 months to have a home repossessed, even longer now with the introduction of various government-backed schemes and these latest figures for 2010 are based upon householders who experienced difficulty up to almost a year ago.
So all those home owners that are missing the first payment this month and can no longer meet their mortgage payment, so in theory will not surface or appear on the CML register until late this year, if not next year!
The good, the bad and the ugly sides of the of Tracker mortgage
On the positive side those on Tracker mortgages and some on Standard Variable Rates (SVRs) have benefited from historically low interest rates for 24 consecutive months and I hear that many consumers are paying over the top each month in order to get their mortgages down.
Equally there are some that have been saved from repossession purely because the low interest rate has meant that their normal monthly mortgage payment has been reduced for example, from £1400 to around the £450 - £600 mark. The latter must be thinking are we about to see an increase in interest rates, is the end nigh for their 'Honeymoon period'?
You simply cannot ignore the unemployed, more so as their numbers are expected to climb again over the next 18 months as the austerity cuts begin to bite. Repossession figures will surely rise when those out of work can no longer pay their mortgages having exhausted family and friends with that one more monthly payment before it 'turns around'.
Redundancy and credit card payers
We also have some people using their redundancy payments to keep up the mortgage repayments, while there are an estimated one million people using their credit cards to meet their current mortgage commitments.
Chasing the mortgage shortfall debt for 12 years or more
Not many house owners are aware that any debt still owed to the mortgage company after the repossession and subsequent sale of the property is recoverable by the lender for a period up to twelve years in the UK. This counts from the date of the last payment or acknowledgement of the debt, and applies on any sole or joint mortgage account. I have many clients still paying back from 1990, that's 21 years ago!
Struggling to meet your mortgage payments?
• Your mortgage needs to be paid before your credit card commitments
• Contact your mortgage lender sooner rather than later
• Visit the government website www.direct.gov.uk to see if you qualify for any of the mortgage rescue schemes.
I do not accept that house repossession numbers are stable or falling as much as is being reported. I think consumers are becoming more adaptable and for many, a SAR scheme is an attractive proposition when faced with repossession as it can offer stability as the move from owner to a tenant can help keep the children at the same school, and the parents to stay nearby to friends. More importantly to many, no one need know what you have done, which can save awkward questions and embarrassment within the community.
I know what it's like to lose a home. I was one of eight children and it happened to my family when I was 15 years old.