9
Aug
Repossessions drop to 18-month low, lenders say
The number of homes being repossessed in the UK has fallen to
its lowest level since the end of 2010, says the Council of
Mortgage Lenders (CML).
There were just 8,500 repossessions in the second quarter of the
year, down from 9,600 in the first quarter.
The drop has come despite the economy falling into recession and
the high level of unemployment.
The CML said repossessions were being suppressed by low interest
rates and help for unemployed mortgage borrowers.
"The figures show that lenders, borrowers and debt advisers are
working together to get through the current period of economic
difficulty and keep mortgage possessions in check," said the CML's
director general, Paul Smee.
The figures mean that repossessions are running at a slower rate
than the CML had expected.
Its original forecast for the whole of this year was that 45,000
homes were likely to be seized by lenders.
A key factor in the better-than-expected outcome so far has been
the impact of the government's Support for Mortgage Interest (SMI)
scheme.
This covers the mortgage interest payments of unemployed people
on up to £200,000 of their home loan.
The support kicks in after a 13-week waiting period - a
temporary rule that has been in place since the start of 2009.
However, the scheme is due to revert to its original 39-week
waiting period at the end of this year.
The CML said it was vital that the government kept the 13-week
rule in place, to help stave off any future rise in
repossessions.
"Decisions by the authorities to cut interest rates aggressively
and introduce better protection for borrowers through more generous
entitlement to SMI meant that lenders were able to avoid possession
to a much greater extent than we expected," the CML said.
"Over the last three years, paying SMI after a three-month
qualifying period and providing more generous cover have helped
nearly 250,000 people stay in their homes at any one time," it
added.
Still struggling
Repossessions for 2012 appear to be on track to be slightly lower
than last year and the lowest since 2007.
The CML reported that the number of borrowers in arrears, of
2.5% or more of their outstanding mortgage, was flat.
There were 157,400 people in this position in the second quarter
of the year, slightly fewer than in the first three months.
However, the CML warned that things could take a turn for the
worse if the economy deteriorated further.
"The Bank of England forecast for growth reminds us of the
pressures that may disturb the current pattern of stability," Mr
Smee said.
Richard Sexton, of e.surv chartered surveyors, said thousands of
distressed borrowers were being kept on "life-support" by their
lenders.
"To banks' credit they've done everything they can to keep
people in their homes, but now the economy is slipping downhill
they'll be forced to switch those life-support machines off," he
said.
"We'll soon reach a tipping point where the market will be hit
by a glut of repossessions once banks decide they can no longer
afford to sustain all of these 28,000 struggling borrowers [in long
term arrears]".
Mark Harris, of mortgage brokers SPF Private Clients, added:
"Mortgage rates continue to rise, despite the non-movement of
base rate, with more than a million homeowners seeing an increase
in mortgage rates in May, for example."
"Those with little or no equity in their homes don't have the
luxury of being able to remortgage on to a cheaper deal."
Fewer court actions
The latest statistics from the Ministry of Justice showed that the
number of repossession actions started by lenders in the courts in
England and Wales - the start of the repossession process - fell by
8% in the second quarter from the first, to just 15,050.
The number of such claims that were eventually approved by a
judge, leading to the granting of a possession order, also fell by
8%, to 11,642.
And of these, nearly half were suspended to give the borrower
more time to sort out a way of making some payments, as an
alternative to their home being seized.
"This fall in the number of claims coincides with lower interest
rates and a proactive approach from lenders in managing consumers
in financial difficulties," the MoJ said.
SOURCE: BBC News