Mortgage lenders repossessed 18,900 properties in the first half of this year, compared with 13,400 in the second half of 2007 and 12,800 in the first half of 2007, according to the Council of Mortgage Lenders. This represents a 47% increase in one year.
The possession rate for all mortgages was 0.16% for the first half of the year, up from 0.11% in both the first and second halves of 2007.
Total number of households with arrears of three months or more stood at 155,600 at the end of June, up from 129,600 at the end of 2007 and 120,800 at the end of the first half of last year.
The arrears rate stood at 1.33% of all mortgages, up from 1.10% at the end of 2007 and 1.02% at the end of the first half of last year.
These figures appear on track for the CML’s forecast of 45,000 total possessions in 2008 and 170,000 mortgages in arrears of more than three months by the end of the year. The CML pointed out that the numbers remain extremely small when seen in the context of the 11.74 million mortgages in the
Adverse sector
As would be expected, the non-conforming credit sector has been hit harder than most of the mainstream market, which continues to perform well. This is exacerbated by a greater proportion of adverse credit loans being linked to Libor, which remains high, although it has come down by around 20 basis points in recent weeks.
The dramatic reduction in the availability of new adverse credit mortgages has also affected borrowers who might otherwise use remortgaging as a strategy to help manage their payments.
Borrowers are coping
CML director general Michael Coogan observed: "The number of people facing difficulty needs to be kept in perspective. The good news is that most people are coping well and continuing to pay their mortgages in full, despite the higher costs of food and fuel and the higher mortgage rates now prevailing in the market for those coming off cheaper original deals.
"But it is inevitable that more borrowers' coping strategies will come under pressure in current conditions than in the unusually benign years of the last decade. That's why lenders, government and the advice sector are working closely together to minimise the impact on borrowers.
Arrears and repossessions figures are likely to be slightly higher as CML numbers relate only to first charge mortgages, not to other consumer loans secured on people's homes.
It’s not the 1990s
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), commented: “The wider economic situation remains much better than the early 1990s, with lower interest rates, relatively few people facing negative equity and good levels of employment, which means that this time round fewer people are losing their homes.
“However, according to both the FSA and the CML’s figures the number of people falling into arrears is higher than it has been since the first half of 2001. The number of people facing possession is at its highest level since 1996. This is mainly in response to affordability issues – homeowners have borrowed the maximum mortgage possible and in some cases may have over-extended themselves with unsecured debt. As a result they can’t afford their current mortgage or remortgage because of the limited availability of loans at an affordable price.”
Two priority issues
Williams went on to say there are two priority issues for the government, and indeed for lenders, which should be dominating the policy agenda.
He said: “The first is restarting the funding market so lenders can once again tap wholesale funds that would enable a wider range of reasonably priced mortgage products to be offered to consumers.
“The second priority would be to revamp the government’s income support for mortgage interest scheme. This is dangerously out of date now in terms of its coverage of the market (the mortgage value limit for assistance is £100,000) and time in which it kicks in (only after 38 weeks). A decent Income Support for Mortgage Interest (ISMI scheme) would stop people getting into difficulties and keep them in their homes. It is targeted at those in need. Labour was strongly critical of the Conservative government for cutting it back in 1995 and it should move to up date it immediately.”
Sue Edwards, head of consumer policy at Citizens Advice, agrees with Williams last point, as does the CML, and is urging the Government to strengthen safety nets for homeowners at risk.
Edwards said: “Efforts need to be made to boost existing provision for home owners on low incomes. Overhauling the Government support available to low income home owners, such as Income Support for Mortgage Interest (ISMI) would be a helpful start.”
She added: “Bringing in a ‘pre-action protocol’ for mortgage arrears without delay would ensure that court action is only taken as a last resort, where all other options have failed and no agreement can be reached.”
Citizens Advice Bureaux in
Date: 7th, August, 2008
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