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Thursday 10th November 2011
Figures published today by the Council of Mortgage Lenders (CML) show that the number of repossessions in the third quarter of this year reached 9,200, up 100 from 9,100 in the second quarter of 2011.
So far this year, a total of 27,500 properties have been taken into possession – 4 per cent fewer than in the equivalent period last year. Levels of mortgage arrears remained reasonably stable over the same third quarter period.
Bev Budsworth, managing director of multi award-winning debt management company,The Debt Advisor, stated: “It’s not surprising to see the levels of repossessions on the rise again. I suspect that we are not seeing the true picture yet as the actual number of orders takes time to progress through the system. again, I think that record low interest rates are damping down the figures and holding back what could be a potentially huge increase.
“the figures also show the number of people with large arrears, over 2.5 per cent, has fallen to 161,600 down 2 per cent from 165,200 at the end of September 2010. Despite these improvements there are still a large number of cases with significant arrears: 27,300 loans have arrears of more than 10 per cent of the outstanding balance. though it’s encouraging to see a dip in the numbers of people in large scale arrears, there is still work to be done to improve the picture for borrowers on a wider basis.”
Bev explained: “the first half of this year saw slightly fewer than 100 properties being repossessed every day. the CML is sticking to its revised forecast that repossessions in 2011 could reach around 40,000 – a similar figure last seen since the height of the credit crunch in 2009 and, before that, not seen since 1996. it also held its view that 2011 would close with around 180,000 mortgages in arrears.”
Desperate measures
“low interest rates and lenient lenders have definitely helped limit today’s figures but it’s clear now that other economic factors are forcing people to take more desperate measures,” she added.
“Rising inflation, a 17-year high in unemployment, the spiralling cost of living and a very weak mortgage market have all compounded to limit people’s options and remove the financial ‘safety net’.
“This is driving people over the edge and forcing them to throw caution to the wind. we are continuing to see a rise in the ‘impoverished middle classes’ having to pay for day-to-day costs on their credit cards. In some of the more extreme cases, they have no other option than to pay their mortgage on their plastic just to keep the roof over their heads!”
Bev’s comments echo the findings from homelessness charity, Shelter earlier in the year. according to its research, more than two million people had used a credit card to pay their mortgage or rent in the previous 12 months – an increase of nearly 50 per cent.
She continued: “with one house in the UK being repossessed approximately every 15 minutes, keeping your home continues to be a daily struggle for some. I would never advocate using a credit card to settle a mortgage payment, especially when the average interest rate is around 18 per cent. I would always urge people to speak to their lender as early as possible. Work out what you can afford to repay with a simple income / expenditure calculation and present them with a solution, not just a problem.”
Help from lenders
Although the number of repossessions has reduced from a high of 47,700 in 2009, it’s still nearly five times the level that was seen in 2004. Credit Action statistics reveal that the typical adult owes 122 per cent of average earnings – a figure that is set to rise with the threat of higher debt and unemployment, according to Budsworth.
“Lenders are helping and are continuing to exercise their discretion when it comes to people in arrears. Various schemes have had limited success but the real key to keeping a lid on the figures is the record-low interest rates. however, there is still help available to people finding it difficult to meet their mortgage commitments.
“as long as people can hold onto their job, dealing with the mortgage arrears should always be the first priority, followed by unsecured debt. That’s exactly where Individual Voluntary Arrangements (IVAs) and debt management plans can help as they automatically prioritise payments to secured lenders, which includes provision for clearing arrears. it is then relatively simple to get unsecured loans on reduced payments until the individual can increase their income.
“Mortgage Payment Protection Insurance (MPPI), not to be confused with Payment Protection Insurance (PPI) which has had some pretty bad press recently, is also really important. It’s basically private insurance taken out to make sure mortgage payments are made even in the event of unemployment or sickness. often referred to as ASU (accident, sickness and unemployment) insurance, this type of insurance is more important now than it’s ever been.
“Above all, effective budgeting is vital if you are struggling with your mortgage arrears. When you know what your surplus is, you can go back to your lender and negotiate a provision for mortgage arrears in order to clear your arrears over a reasonable period of time – usually between two and four years, or even the remainder of the mortgage.”
Bev concluded: “we can no longer ‘throw caution to the wind’ as we did a decade ago. we must all make a more planned and concerted effort to plan our finances better and learn to live within our means.”
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