Repossessions back on the rise
12 May 2011
Figures published today by the Council of Mortgage Lenders (CML) show that the number of repossessions in the first three months of this year reached 9,100 – up 15% from 7,900 in the last quarter of 2010 but down 10% from the same period a year ago. Levels of mortgage arrears were also down over the same period.
Bev Budsworth, managing director of multi award-winning debt management company, The Debt Advisor, warned: “Today’s figures do not come as a shock. Although it’s good to see repossessions down on 12 months ago, unfortunately, like inflation, I expect things to get worse before they get better as people feel the financial squeeze in this increasingly volatile economy.”
She explained: “Lenders just aren’t as confident as they were last year that they will be able to lower arrears and repossessions. According to the CML, total repossessions in 2010 were 36,300 – down from the initial forecast of 53,000 and revised forecast of 39,000, and a significant reduction from 2009 figures of 47,700. It is forecast that repossessions in 2011 could reach around 40,000 – a similar figure seen in the height of the credit crunch.
“A 2010 CML report warns that the economic recovery remains weak and cuts in government spending, tax increases, higher inflation and the prospect of rising interest rates are all likely to bear down on borrowers’ finances.
“According to Association of Mortgage Intermediaries (AMI), there is a direct correlation between unemployment and mortgage arrears. It further reports that the number of mortgages in more than 12 month’s arrears has quadrupled since 2007.”
The Homeowners Mortgage Support Scheme which was created to help borrowers deal with financial hardship and a sudden loss of income was closed on 21 April 2011. According to an interim report by the Department for Communities and Local Government, in the year up to March 2010, only 32 borrowers were entered onto the scheme.
The Mortgage Rescue Scheme is still in place and allows families to get an equity loan to reduce their mortgage or sell their home and remain as tenants. Up to March 2010, the scheme had helped 629 people.
Bev has seen a number of clients benefit from these schemes, she continued: “We have come across a number of cases where individuals with arrears have been able to sell their property for 95% of the current market value and then rent the property at less than market rates. This has allowed families to free up income to cover reasonable living costs and make a contribution to their unsecured debt.
“The continued decline of house prices since March 2010 means that there is an ever-increasing stock of houses appearing on a stagnant housing market. Therefore, for individuals in debt and with arrears, selling their property quickly is far from certain.
“As long as people can hold onto their job, dealing with the mortgage arrears is first priority followed by dealing with unsecured debt. That’s exactly where Individual Voluntary Arrangements (IVAs) and debt management plans can help as they automatically prioritise payments to secured lenders, which includes provision for clearing arrears. It is then relatively simple to get unsecured loans on reduced payments until the individual can increase their income.
“The problem really arises when individuals lose their jobs and there is little or no income for the household. This is likely to become a real problem for many more people as we move through 2011.
“Effective budgeting is vital if you are struggling with your mortgage arrears. When you know what your surplus is, you can go back and add a provision for mortgage arrears in order to clear your arrears over a reasonable period of time – usually between two and four years, however, this can be extended to the remainder of the mortgage.
“However, if you are facing repossession and you are in a position to pay your normal mortgage payment but your lender is reluctant to agree a more reasonable repayment period, you should seek legal advice. There is very helpful information on the direct.gov website which includes how to get free legal representation.
“Finally, don’t forget your unsecured debts. There is no sense agreeing to a payment plan that leaves you without enough money to live on or without the minimum payment for any credit cards or loans. If neglected, these creditors will ultimately opt for judgements and charging orders which could compound the problems even further.”
All debt solutions should be very carefully considered. Fees will be charged to the client if a solution is taken in order for us to set up a plan and maintain it - all fees will be outlined during the consultation. The Debt Advisor complies with the Consumer Credit Act and clients have the right to a cooling off period of 7 days. It is likely that their ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term