Repossession orders are expected to keep rising
The Ministry of Justice is due to release a report into repossession levels and repossession order levels this week, and many expect the picture to look very bleak. According to recent report repossession levels could rocket this year by around 67%, as homeowner continue their struggle with increased repayments on their mortgages, rising living costs, and higher bills, all of which are having a profound impact on household finances.
The figures in the report will cover England and Wales, and will show to what levels households have managed to cope with rising costs and the global credit crunch. Many officials have confirmed that repossession order levels have already risen over recent months, although not all of these orders will result in repossession. This is because the order may be suspended based on the ability of the homeowners to come to some arrangement with regards to clearing their arrears with the lender.
Recently released figures indicate that whilst repossession orders have definitely risen they are nowhere near as high as they were in 1991, when the number hit 142,905. In 2003 repossession orders fell to a low of 41,038, but they have now risen to 95,374. Whilst these figures are still a long way off compared to 1991, experts do expect them to continue rising over the course of this year, as homeowners continue to struggle with their finances.
Reports from the Council of Mortgage Lenders have also indicated that whilst repossession figures for last year were slightly lower than the 30,000 predicted, coming in at around 27,000, they are expected to rise to around 45,000 for this year. This is despite the falling interest rates, which have been cut three times since December of last year.
One economist recently stated: 'Gordon Brown's decade at the Treasury was characterised by years of easy credit fuelling a house price boom and a mountain of personal debt. But he has left a legacy of falling take-home pay and an increasingly ferocious credit squeeze - with homeowners and would-be homebuyers left to pick up the pieces.'
Another official stated: 'The stark rise in repossessions forecast shows why the Chancellor and the Bank of England are so keen to sort out the problems in the wholesale financial markets. Unless or until this tap of mortgage finance starts to flow again, the outcome will be a reduction in house prices and an increase in repossessions.'
Things have been made more difficult by the fact that credit conditions have become so tight, making it hard for consumers to switch to a cheaper mortgage in order to keep up with repayments. Whilst the government has launched a mortgage rescue plan banking officials state that this could take some time to take effect.
The Council of Mortgage Lenders stated: 'In the short term the trend of increasing prices and products being removed from the market is not going to be reversed. As and when the banks start lending to each other, the rate for lending will go down and that means that that will start to bring the price down but it is not going to be a dramatic reversal. It is going to be a slow process at best.'
10th May 2008
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