More Repossessions Expected as Market Declines

by Mark Johnston

Banks have warned that they are expecting that the number of repossessions to increase because of continued issue within the economy and within personal budgets.  They have told home owners that they are “not confident” that might not be able to lower repossessions or affect arrears as they had done last year.

Last year, the figures from the Council of Mortgage Lenders showed that the number of repossessions dropped from 47,700 to 36,300.  There were however significant measures taken by both the banks and the Government to ensure that if people were evicted from their homes, they were only removed in extreme cases and as the absolute last resort.  This was done to ensure levels were lower than forecast amid the storm of the recession.

Lenders have warned that they are expecting a rise in the number of evictions this year; they estimate that the figure may go as high as 40,000, close to the number of repossessions during 2008 at the height of the credit crisis.

The Council of Mortgage Lenders has pointed the accusation finger towards Government cuts, higher living costs, a weak economy and the possible and inevitable rise in the Bank of England Base Rate. “We are not confident that arrears and possessions will be countered so successfully in 2011. “The outlook for economic recovery remains weak, and planned cuts in government spending, tax increases, higher inflation and the prospect of rising interest rates are all likely to bear down on borrowers’ finances.” “Additionally, the government has cut directly support for borrowers.” from the CML Annual Report for 2010.

Helpfully the Government has closed a number of quite helpful schemes that supported struggling households and homeowners.  If a home owner was facing the prospects of a loss of income, then the Homeowners Mortgage Support Scheme would allow them and help them to reduce the amount they paid out on a monthly basis for a period of two years.  Sadly, the Government has decided not to continue to provide this service and it came to an end on the 21st of April.

Another scheme from the Government is the Mortgage Rescue scheme which allows families draw on the equity held in their home and release cash to help reduce their mortgage further.  The scheme also allows some home owners who are struggling to sell their home and remain as a tenant in the home.

There is much concord within the industry, with the CML raising their concerns about the possibility that the number of homeowners who may fall behind of their payments and who are then in a repossession position, saying “On behalf of lenders, we remain committed to working with borrowers, advice agencies and the government to minimize mortgage arrears and possessions in the challenging times ahead.”

There is, along with wide concern for homeowners in trouble, is the understanding that the best thing that the Government can do is to reduce the phenomenal budget issue within the UK and bring the economy back into line.  This would avoid the need for rapid base rate increases and reduce the possibility that homeowners will struggle to pay their monthly mortgage repayments. “That’s why the Mortgage Rescue Scheme is still available as a last resort to homeowners facing the real threat of repossession.”

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