High Interest Rates Leading to Increased Repossessions in UK
According to the Council of Mortgage Lenders (CML), UK homeowners are beginning to feel the strain due to the increased cost of borrowing in the UK.
With another increase in the base rate resulting in rising mortgage costs, mortgage repossessions in the UK are on the increase with the second half of 2006 seeing repossession increasing to 8,860 compared with 8,140 in the first six months of that year.
The increase took the total for 2006 to 17,000, which is a similar amount to 2001. This number represents an increase of 65 per cent on figures from 2005.
As the CML had forecast 18,000 repossessions in 2006, the figures aren't as bad as predicted. However, the same number was also forecast for 2007 and 2008 but the CML now predicts the number of repossession in 2007 and 2008 to hit 19,000 and 20,000 respectively.
David Stubbs, senior economist at the Royal Institution of Chartered Surveyors, said: "Although repossessions continued to rise during the second half of 2006, the rise was slower than many had feared.
"Although strong economic growth will still be a positive force for households in 2007, the RICS expects repossessions to rise further as the impact of recent increases in interest rates takes its toll and homeowners struggle to repay the mortgage loans."
Despite the slower than expected rise in repossessions in 2006, the CML predicts short term mortgage arrears to rise during 2007 as the higher interest rates begin to take effect.
CML director general, Michael Coogan, said: "The arrears picture at the moment is fairly complex. On the one hand, the wave of problems caused by previous interest rate rises has now worked through, so recently arrears have fallen. On the other hand, interest rates are rising again, and payment shock may be an issue for some this year as existing or discounted deals expire."
2nd February 2007