Figures from the Council of Mortgage Lenders (CML) show that 140 homes are being seized each day, a rise of 50% year-on-year between the first quarters of 2008 to 2009. There were 12,800 properties repossessed in the first three months of this year – a rise of 23% on the last quarter of 2008. In the first three months of 2008, there were only 8,500 repossessions.
Despite these somewhat depressing figures, the CML have stated that this year may not be as bad as predicted. They had said that there would be 75,000 repossessions in 2009 but have now decided that figure may be ‘pessimistic’ and would be reviewing it. The main reason that things aren’t expected to get as bad as the record levels of repossessions seen in the early 1990s is the low interest rates. Slashing the base rate of interest to 0.5% has encouraged lenders to lower their standard variable rates and, whilst arrears and repossessions are rising, they are not expected to reach those record levels.
The number of loans with arrears of more than 2.5% of the mortgage balance rose from 182,600 in the last quarter of 2008 to 205,300 in the first three months of 2009 – a rise of 12%. During the first three months of 2008 there were 127,000 loans in arrears by that figure; these latest statistics represent a 62% year-on-year rise.
CML Director General, Michael Coogan said: “It is quite clear that the number of arrears cases is rising far more markedly than the number of repossessions.” He went on to dispense some advice to homeowners who may be in such a position: “The key message continues to be: talk to your lender as soon as you identify difficulties emerging, and take advice from an independent money advisor if you have other debt issues as well as your mortgage. Lenders do not want to repossess if a realistic alternative solution can be found.”
However, there are factors which indicate that the CML data may not be entirely accurate. The CML have admitted that technical changes to data had led to difficulty in comparing the measure of mortgages in arrears as a percentage of all loans. This is due to a recent decision to exclude long-standing mortgages with very small balances and a rise in the number of people paying off their mortgages.
Information coming from the Ministry of Justice also does not seem to agree with the CML figures. It reported that mortgage possession orders made in court fell from 29,771 in the last quarter of 2008 to 17,054 in the first three months of 2009. Economic experts believe that this is not only due to low interest rates, but also to government initiatives designed to reduce the number of repossessions such as ‘mortgage rescue’ and the ‘home-owner mortgage support scheme.’ Although these schemes are not useful to all homeowners in difficulty, they are forcing lenders to examine all alternatives before pressing ahead with a full-blown repossession. One thing that the experts are all agreed on, though, is the fact that home repossessions and individual bankruptcies are set to rise significantly in the coming year.