Figures published today by the Council of Mortgage Lenders (CML) show that the number of repossessions in the fourth quarter of 2009 reached 10,200 – down 13% from 11,700 in the previous quarter and 2% on the corresponding quarter of 2008. However, the total number of repossessions for 2009 was 46,000, which is still 15% higher than the total amount for 2008.
Bev Budsworth, managing director of The Debt Advisor, commented: “Last year the CML cut its forecast for the total number of repossessions in 2009 from 75,000 to 48,000. The actual figure for 2009 was 46,000 so it’s encouraging to see that government initiatives in place to help people struggling to meet their mortgage payments are working. Only last month, the Financial Services Authority (FSA) proposed new rules on mortgage repossessions to ensure that borrowers are treated fairly by their lenders, that lenders in arrears do not incur any additional unfair charges, and that taking back the keys is only ever used as a last resort.
“However, if you were one of the half a million people who lost their job last year, you would be forgiven for not having such a positive outlook. The fact remains that the majority of people default on their mortgages because of sudden loss of income. Although the level of unemployment unexpectedly fell last month, there are still over 2.4 million people unemployed or some 1,400 losing their jobs every day. The threat of arrears and repossessions is still a very real one for thousands of people.”
Bev’s comments come at a time when the Chartered Institute of Personnel and Development’s (CIPD) report that the recession has already claimed 1.3 million jobs and two-thirds of these people were paid 28% less in their new job, when they eventually found one. The CML also estimated that throughout 2009, 132 properties were repossessed every day. Bev continued: “Although the UK is now officially out of recession, a growth rate of 0.1% is disappointing and indicative of a depressed economy. Unemployment and repossessions are inextricably linked and could get far worse if inflation and interest rates rise.
“We’ve just seen personal debt rising to record levels once again which may be pointing to a love affair with spending that simply won’t go away. Too many people are still laden in debt and simply cannot afford to pay their bills and end up defaulting on their mortgage, or worse, losing their homes.
“The only saving grace for many people is that interest rates are at a historic low. If rates start to rise, then this, coupled with high employment and drastic public spending cuts expected from the next government, would mean that many thousands of people would be pushed over their ‘tipping point’ and struggle with their mortgage repayments. If interest rates do rise, I expect to see a steady increase in arrears and repossessions throughout 2010.”
Bev concluded: “People must always remember that their mortgage is secured against their house and if they fail to pay their mortgage, they risk possible repossession and losing their homes. Times are tough but help is available. The key to combating mortgage arrears is by engaging your lender at an early stage and not just giving up and handing the keys back. There is help out there and options available to ease the pressure and keep the roof over your head.
“Speak to your lender as early as possible. Do your homework, work out what you can afford to repay with a simple income / expenditure calculation and present them with a solution, not just a problem. It’s always worth remembering that you can reduce your outgoings on unsecured debt by considering an Individual Voluntary Arrangement (IVA) or debt management plan – you must always prioritise your secured debts such as your mortgage and any arrears!
“The housing market is definitely picking up. House prices have risen for the seventh consecutive month rising by 0.6% in January and 3.6% higher than 12 months ago. Hopefully, an invigorated housing market should see lenders easing their criteria and therefore provide options for people struggling with mortgage repayments. According to the Halifax, the average price of a UK home is nearly 10% higher than it was at the height of the slump in April 2009, meaning that there will still be a vast amount of people with a healthy level of equity in their property.
“I would always advise that people seek professional help if they are struggling to repay their mortgage and see if an IVA can help avoid bankruptcy and the potential loss of their home. Bankruptcy is a growing worry with the Insolvency Service recently reporting over 73,000 bankruptcies in 2009 – a 9% increase on 2008’s figures. If you have a property with equity, you need to avoid bankruptcy at all costs as, not only may you lose your home, but the really frightening part is there are many unscrupulous advisers out there charging individuals thousands to declare themselves bankrupt and only 20% of all bankruptcies return any funds to creditors!”