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Repossessions on the Rise

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According to the Council of Mortgage Lenders (CML), repossessions have risen in the first three months of 2011.  Although the figure is 10% lower than the same period for the previous year, the 9,100 homes repossessed in the first quarter of 2011 represents a 15% rise on the last quarter of 2010.  The group has predicted that a total of 40,000 people will lose their home this year, which, if realised, would be an increase of 3,700 (10%) on 2010.

Conversely, the number of households getting behind on their mortgage payments has decreased in the same period.  At the end of March, the number of mortgages with arrears equivalent to 2.5% or more of the outstanding balance stood at 166,900 which was 1.47% of all loans.  At the end of December 2010 this figure was 170,000; 1.5% of total loans.  However, the director general of the CML, Michael Coogan, was somewhat pessimistic when he warned that: “Looking ahead, the financial position of many households is likely to be stretched for some while, and some will inevitably find themselves in difficulty.”

Although lenders have a variety of options available to help nurse borrowers through temporary problems, the regulator of the mortgage market has warned lenders that being too generous with borrowers getting behind on payments could cause problems, as would repossessing too readily.

The big debate that is occupying most industry commentators centres on when the Bank of England is going to increase the base rate of interest from its record low of 0.5%.  This will have a big effect on households already struggling with the rising cost of living, but the CML said that a rise of one quarter of a percent, to 0.75%, would not push a host of homeowners into arrears.  However, a stagnant market may prevent those in financial difficulties from realising a quick sale.

Repossession claims issued in England and Wales rose for the third successive quarter during the first three months of 2011.  Of these 20,034, 14,568 repossession orders were made, but 48% of the orders were suspended.  Statistically, the north east and north west of England had the highest number of repossession claims.