Repossessions on the rise?

Repossessions will be up to 75,000 in 2009 according to the Council of Mortgage Lenders (CML), which will be almost double the 2008 figure of 40,000.

In the first quarter of 2009 the number of homes repossessed rose to 12,800, a 23% increase on the previous quarter up a 50% increase on the same period of 2008 which was 8,500. The current trend represents 1,000 plus repossessions per week.

However CML have stated that this figure may be too pessimistic. As the Governments help for homeowners facing difficult financial issues kicks in, and lenders committing to be sympathetic to these difficulties (only going down the repossession route as a last resort) this should help lower the repossession figures.

The Government has recently introduced the Home Owner Mortgage Support Scheme for those who suffer a temporary loss of income and the mortgage arrears pre-action protocol, which lays out the steps which lenders are expected to take before going to court. However Citizens Advice, Money Advice Trust and Shelter have suggested that sub-prime lenders who offer mortgages to those with a poor credit history are not complying with the new government scheme.

The level of arrears on the first quarter however have increased by 12% on the previous quarter to 205,300, which is a figure based on 2.5% or more behind payments of the mortgage balance. But despite this rise the Ministry of Justice has revealed figures which suggest that lenders taking court action against the mortgagee has fallen 13% to 22,609 this quarter against the previous quarter. Actual possession orders have dropped 13% to 17054 from the beginning of the year to end of March compared to the previous 3 months. Whether this is due to delayed repossession orders or abandoned repossession orders remains to be seen.

One area reported by the CML that has seen an increase in repossessions is in the buy-to-let market. There were 1300 repossessions in the last 3 months of 2008 which rose to 1700 for the first quarter of 2009. The level of repossessions for the first 3 months of 2008 was 900.

The United Kingdom entered a recession in the second half of 2008, and it is generally expected that the economy will contract by around 4% during 2009, inevitably raising the jobless totals. How hard the recession hits and how effective the government measures will be are yet to be seen. Reports for the second quarter will provide a far clearer picture.

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