Home Repossessions On The Increase

An average off 77 properties a day were repossessed in the UK in the first half of the year – an increase of nearly a third, and it takes the rate to its highest level for eight years.

If the five interest rate rises have not yet had their desired effect on the inflation as the Bank of England hoped it would, then they are certainly beginning to have an impact on homeowners struggling to meet mortgage repayments.

During the first six months of 2007 14,000 properties were seized by banks and building societies, an increase of 30% on the same period last year.

The Council of Mortgage Lenders released the figures late last week as other figures showed that personal insolvency levels have gone down.

Financial experts voiced concerns that the personal insolvency figures should not be seen of improving personal finances in general terms. Instead, they said, it was likely that people were simply moving their debt from credit cards to their property. If that is the case it looks like a desperate move, but would explain the decrease in personal insolvencies. Experts also say that the three rate rises of this year (January, May and July) have yet to have had their impact felt. A repossession epidemic may not be far away.

The movement of credit cad debt to property debt reflects the paying off by consumers of cheap loans available from the banks between 2000 and 2005. The Council of Mortgage Lenders (CML) last week reported that 1.1% of mortgage loans have fallen into arrears since January. The housing market is forecast to cool down throughout the rest of 2007 and into 2008, and this could leave those unable to repay their mortgages in the difficult position of not getting as much for their house as they would like if they need to sell.

Although left unchanged at 5.75% last week, the Bank’s base rate is not expected to remain there for the rest of this year and a 6% rate is forecast for the autumn. A homeowner on a £200,000 variable rate mortgage would be left looking for an extra £3,000 per year – and wages are not going up by that much at the moment. Indeed, if wages were to start going up by the amounts required to keep up with mortgage increase, the Bank would be met by rising inflation – as a result of its own actions!

Repossession levels are still well below those of 1991 when negative equity was at its worst. Then there were 76,000 properties repossessed, at a rate of 208 per day.

Shadow chief secretary to the treasury, Phillip Hammond said: “Falling real incomes and higher taxes are causing real hardship for millions of hard working families. Gordon Brown’s ten years as Chancellor have left Britain with record personal debt, rising taxes and falling take-home pay. No wonder he couldn’t wait to get out of number 11.”

Other data suggests otherwise for middle class families; their earnings have gone up twice as fast as their cost of living in the last ten years. Income has gone up by 42.8% to average £35,875, and the cost of living has only gone up by 18.2% according to research by Halifax Financial Services.

Tom Smith
9th August 2007

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