House repossessions rose in the first half of the year, by 30% on the same period in 2006, indicating that some homeowners are struggling with the five recent interest rate rises.
The figures are from the Council of Mortgage Lenders, the industry body, which laid the blame on two factors:
An increase in sub-prime mortgage lending, where the higher risks from lending to people with poor credit histories means those arrears more often lead to repossessions.
More aggressive arrears management by lenders, who now typically contact borrowers for repayment as soon as one months payment is missed.
The number of mortgages in arrears of more than three months at the end of June was around 125,100, up 4% from the end of December. The majority (71,800) were in arrears of 3-6 months, while 38,300 were in arrears of 6-12 months, and 15,000 more than 12 months. This means around 1% of all mortgages are in arrears.
14,000 houses were repossessed in the first half of the year, 18% more than in the previous six months, and 30% more than in the first six months of 2006. This equates to around 1 in 840 mortgages.
According to Michael Coogan, director-general of the CML:
“The sharp rise in repossessions in the first half of this year has been driven by a combination of factors, but the absolute number of repossessions is still low by historical standards. But anyone who thinks they may face difficulties should talk to their lender early to explore their options. Lenders see possession as a last resort, but allowing arrears to mount up makes repayment difficulties more difficult to deal with, and is not a sustainable strategy for everyone.”
The figures represent a growing trend, and it is important that homeowners in arrears take steps to prevent this ending in repossession. If arrangements cannot be made with lenders, then it is better to seek other ways out then to just let the repossession process carry on.
Homeowners in trouble could stop repossession by opting instead for a quick house sale, which could allow them to pay off creditors and leave enough left over to rent or buy elsewhere.
SOURCE: http://www.cml.org.uk/cml/media/press/1239
