Repossessions jump

15 May 2009

The number of people losing their homes because they couldn't pay their mortgage jumped during the first three months of 2009 to 12,800.

However, the Council of Mortgage Lenders (CML) says it original forecast for 75,000 repossessions for the year as a whole was "pessimistic" and probably will not be reached.

Repossessions, which are when a bank or building society takes possession of a property because the owner has failed to pay their mortgage, jumped 23% in the first quarter of 2009, up from 10,400 in the final three months of 2008.

Despite mortgage lenders coming under pressure to do more to help people who get into difficulty paying back their homeloans, the number of repossessions has been streadily increasing for some time. In the first three months of 2008 there were 8,500 repossessions.

Missed mortgage payments are also on the up; the number of borrowers with arrears of more than 2.5% of their mortgage balance rose by 62% to 205,300 for the year to March 2009.

Michael Coogan, director general of the CML, says: "It is clear that mortgage arrears continued to increase. So did repossessions, but not as much as our 75,000 forecast figure for the year would suggest."

He adds that the forecast will be revised over the next month or two.

The fact that the number of arrears is rising faster than the number of repossessions indicates lenders are showing more forebearance when people got into difficulty, says Coogan.

Figures from the Ministry of Justice appear to back this up; possessions claims (made by lenders to the Courts) were down 42% in the first three months of 2009 compared to the same period last year.

In addition, the all-time Bank of England base rate has helped many borrowers as their monthly repayments have fallen.

Although the base rate is likely to remain at its current level of 0.5% for this year, it will have to increase at some point - which could push these borrowers into difficulties.

Bev Budsworth, managing director of The Debt Advisor, predicts that government initiatives to help borrowers struggling to repay their mortgage debt are another reason for downward revision of repossessions.

One scheme introduced was the extension of the period when possession action is taken from three months to six.

"We could well see a continued increase in repossessions later in the year after the new six month threshold is reached," says Budsworth.


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