Figures published today by the Council of Mortgage Lenders (CML) show that the number of repossessions in the first half of this year reached 18,100 – up 9,000 from the first quarter of 2011 but down 7% from 19,500 in the first half of 2010. Levels of mortgage arrears remained reasonably stable over the same period.
Bev Budsworth, managing director of multi award-winning debt management company, The Debt Advisor, stated: “It’s good news that the levels of arrears and repossessions seems to slowly heading in the right direction and especially encouraging that number with large arrears is also reducing. We have seen a slight increase in the number of mortgages with low level arrears but on the whole, the 7% reduction on the first half of last year shows that the steps that the Government is taking are actually working.”
She explained: “The first quarter of this year saw around 100 properties being repossessed on a daily basis. The CML is sticking to its revised forecast that repossessions in 2011 could reach around 40,000 – a similar figure seen in the height of the credit crunch. It also suggested that the year would close with around 180,000 mortgages in arrears.”
Weak economy
A continually weak economy with low growth, falling house prices, high unemployment and high inflation are meaning that people are reluctant to spend and lenders restricting their funds.
“Lenders are demanding high deposits from borrowers which many of them simply cannot afford and therefore, pricing them out of the market, continued Bev. “Our clients are seeing property sales not proceeding to completion due to purchaser’s inability to fund deposits or mortgage offers falling short of expectations.
“There are an increasing number of people desperate to sell their properties to bail themselves out of financial difficulties due to either accumulated debt or a build up of mortgage arrears. People are looking to buy but quite often cannot sell their own property first or find that they are unable to finance the deal.
“Worse still, if you are one of the 827,000 households that the CML say are in negative equity, you will find yourself unable to sell your property unless your lender is prepared to take a loss, which is difficult but not impossible.”
Bev warned: “Sellers should always bearing in mind that if they have a buyer for their property but it’s in negative equity and they already have unmanageable debts, an Individual Voluntary Arrangement (IVA) could offer a solution. An IVA could be used to pay off any debt and the shortfall in the property price with one affordable monthly payment, while eliminating the extra pressure of individual creditors all demanding their repayments. However, and IVA may not be the best solution and requires careful consideration as it will affect an individual’s credit rating.
First-time buyers
According to Credit Action, the typical first-time buyer deposit in May was 20% or nearly £30,000 with the average first-time buyer borrowing over 3.1 times their income with an average loan of around £120,000.
“First-time buyers, the lifeblood of the housing market, are hardest hit, large deposits, frozen wages and higher prices are making it almost impossible for them to get on to the housing ladder.
“On the flip side, a stagnant housing market with falling prices is making sellers reluctant to accept lower prices for their property and therefore not placing their houses on the market in the first place – compounding the problem further.”
Fall back
Bev continued: “Arrears and repossessions are not a new problem, the difference we have now are the other macro-economic factors like the weak economy and the meltdown of global markets mean that we no longer have any financial fall back.
“If homeowners are struggling to repay their mortgages or facing repossession, remortgaging or consolidating existing loans may have been a solution in the past. Now, due to the stagnant housing market, this is no longer an option and people are even opting for such desperate measures such as so-called ‘log book loans’, ‘pay day loans’ or even selling their gold.
“We can no longer throw caution to the wind as we did in the boom times, we must all make a more planned and concerted effort to plan our finances better and learn to live within our means again.”