Repossessions jump 71% to 3,700 a month

Wednesday, October 29, 2008

Repossessions soared by 71% in the three months to the end of June as increasing numbers of homeowners struggled to meet their monthly mortgage repayments.

The Financial Services Authority yesterday said that lenders had repossessed 11,054 homes in the second quarter of this year, compared with just 6,476 in the same period a year ago.

The figures reflect the strain that homeowners in the UK are under as the credit crisis has resulted in a rapid rise in mortgage costs over the past year, on top of other rising household bills. The FSA also found more homeowners falling into arrears: 312,000 loan accounts in the three months to the end of June, 16% up on a year earlier.

Adam Sampson, the chief executive of homelessness charity Shelter, said the number of people calling Shelter for advice on repossessions has surged by 167% in the past six months.

"These figures are not only shocking and worse than expected, they highlight the crippling severity of the credit crunch on ordinary homeowners," he said.

"It is easy for the FSA to issue new figures highlighting the problem, but as the key financial regulatory body it must start using its teeth to stop lenders rushing to court to repossess people's homes."

The prime minister, Gordon Brown, last week announced that from November 19, lenders must explore options to help people stay in their homes, such as extending their mortgage term, changing the type of mortgage, deferring payment of interest and adding arrears to the overall loan.

The Council for Mortgage Lenders predicted last year that there would be around 45,000 repossessions this year. The FSA's figures are broadly in line with the prediction.

The Liberal Democrats' Treasury spokesman, Vince Cable, said: "Today's repossession figures reinforce the warnings that the Liberal Democrats have given for a long time. The collapsing housing bubble will produce large numbers of casualties. The number of homeowners who have borrowed more than 3.5 times their income has shot up to over one third. Many of those people are now at great risk. If conditions deteriorate further, the current stream of repossessions will become a torrent."

The FSA figures also showed that gross lending fell by 26% in the three months to June, compared to the same period a year ago. "Significantly fewer" new loans had been given to people who could only offer a 10% deposit - down from 15% of new lending in early 2007 to 10%.

The Land Registry said the average price of a home in England and Wales fell 2.2% last month, and 8% in the year to September. These were the sharpest drops since the survey started in 2000.

Howard Archer at consultants Global Insight said: "The fundamentals continue to be largely stacked against the housing market, and it seems odds-on that prices will fall considerably further."

The Bank of England added to the mounting pile of gloomy data yesterday when it predicted that about 1.2m households could fall into negative equity if the housing slump continues.

In its twice-yearly Financial Stability Report, the bank said a 15% drop in prices from their October 2007 peak would leave one in 10 homeowners with outstanding mortgage debt worth more than the value of their home. "Forecasts suggest further falls, although the size of these falls is highly uncertain," the report said.

Source

guardian.co.uk