Home repossessions leap by 21%

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The number of properties repossessed by mortgage lenders leapt by 21% in 2007 to their highest figure since 1999, the Council of Mortgage Lenders (CML) said today.

A total of 27,100 homes were repossessed over the year, up from 22,400 in 2006 and more than three times 2004's figure of 8,200.

At the same time, the number of borrowers at least three months in arrears on mortgage repayments was also up by 8.6% to 129,800.

This follows a 2.8% fall in arrears cases in 2006.

The rise in the number of homeowners struggling with mortgage debts followed three base rate rises in the first half of last year and a tightening in lending criteria caused by the credit crunch.

Although the repossessions figures are the worst for eight years, and have risen sharply for the third year running, they are better than had been expected by the industry.

The CML said the figures was 10% down on its forecast for the year, and represented fewer than one in 400 of the 11.8m mortgages in the UK.

Arrears figures were also relatively low, it said, with fewer than 0.5% of all mortgages accumulating more than six months of missed payments - around one-seventh of the number in the early 1990s when the level of struggling homeowners reached a record high.
Payment shock

Late last year the CML predicted a 50% jump in repossessions in 2008, but today it said conflicting factors had made it difficult to see what would happen in the year ahead.

Two interest rate cuts since December and expectations of more to come meant the payment shock faced by 1.4m borrowers coming off fixed-rate mortgages this year may not be as bad as previously expected.

However, the ongoing credit crunch and slowing economy meant there was "no room for complacency".

The CML's director general, Michael Coogan, said: "Lenders take their responsibilities to borrowers facing repayment difficulties very seriously, and many go to exceptional lengths to provide debt counselling, reschedule payments, extend loan terms, or in some circumstances even allow payment breaks.

"They abandon repossession action right up to the last moment if they can reach a payment solution consistent with both the borrower's and the lender's interests.

"Despite this, the number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets."
Too little, too late

Howard Archer, chief UK economist at Global Insight, said it seemed certain that repossessions would rise "significantly" during 2008.

"The full effect of the marked overall increase in interest rates between August 2006 and July 2007 is still feeding through," he said.

"While the December and February interest rate cuts by the Bank of England will help matters, there is a danger it could be too little for many people.

"This is particularly true if inflationary pressures prevent the Bank cutting interest rates markedly further over the coming months."

Sue Edwards, head of consumer policy at Citizens Advice, said the CML's figures reflected what the charity was seeing around the country.

"Last year, we dealt with over 57,000 problems about mortgage and secured loan arrears - an 11% increase on the previous year," she said.

"The growth we have seen of so called 'mortgage rescue' or 'sale and rent back' schemes targeting people at risk of repossession may also mean the actual figures tend to understate the true scale of the problems faced by borrowers at the margins of affordability."

Edwards said the current safety nets for homeowners on low incomes were "completely inadequate" and the repossession figures showed the system of state support needed to be overhauled.

She added that evidence from visitors to Citizens Advice bureaux was that lenders were increasing problems for struggling borrowers by piling on charges and refusing to negotiate on affordable repayments.

"We want to see all lenders being reasonable when dealing with customers who do get into trouble, and taking court action for possession only as a last resort," she said.


Home repossessions leap by 21% | Money | guardian.co.uk


You cannot live beyond your means without facing ugly consequences. I would cancel everything we had, net included before I would lose the house, as I'm sure most people do when faced with repossession. Hard thing to go through, and it effects your financial history for a long long time.

Good for those with some money and wanting a nice house cheaply

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This is important to me as i'm on the brink myself, so have to do everything i can to prevent rubbish like this. Also my mortgage is with Northern Rock, so i have no idea whats going on. Dont expect them to call in the debt, but it makes me nervous