Home repossessions up 50%

Published by Jon Land for 24dash.com in Housing

The number of people who lost their homes soared by more than 50% during the first quarter of the year, figures showed today.

A total of 12,800 properties were repossessed by first-charge lenders during the three months to the end of March, up from 8,500 a year earlier and 10,400 during the previous quarter, according to the Council of Mortgage Lenders.

But despite the steep jump in people losing their homes, the group said its forecast of 75,000 repossessions during 2009 now looked pessimistic, and it expects to revise the figure downwards.

There was also a sharp rise in the number of people who have fallen behind with their mortgage repayments.

The number of homeowners with arrears of more than 2.5% of their mortgage balance soared by 62% year-on-year during the first quarter to 205,300, 12% more than during the previous quarter.

The Council of Mortgage Lenders (CML) said that although arrears levels were continuing to increase, lenders were committed to working with borrowers who get into financial difficulties.

Michael Coogan, director general of the CML, said: "It is quite clear that the number of arrears cases is rising far more markedly than the number of repossessions.

"Lenders are demonstrably increasing the forbearance they are offering, while many struggling borrowers have gained some breathing space through lower interest rates feeding through to lower monthly payments."

The Government has also launched a range of initiatives to help people who cannot keep up with their mortgages to stay in their homes.

These include enabling them to sell some or all of their home and rent it back from a social landlord, while those who have temporarily lost their income can defer a proportion of their mortgage interest payments for up to two years.

A new pre-action protocol has also been introduced under which the courts can grant a repossession order only if all alternatives to keep people in their home have failed.

The CML's figures contrasted with statistics reported by the Ministry of Justice which showed a steep fall in the number of possession orders being made by the courts in England and Wales.

A total of 22,609 repossession claims were made during the first quarter on a seasonally adjusted basis, 42% fewer than during the same period of 2008 and 13% less than in the previous quarter.

The claims led to 17,054 mortgage possession orders being made, 43% less than during the previous three months, 47% of which were suspended orders.

The MoJ attributed the steep fall in possession orders to the introduction of the pre-action protocol, which it said had coincided with a 50% drop in the daily and weekly numbers of new mortgage repossession claims being issued by the courts.

But it said the extent to which the protocol had led to repossession claims simply being delayed rather than abandoned was unclear.

The CML figures showed that buy-to-let investors were continuing to experience high levels of repossessions.

A total of 1,700 landlords had their properties repossessed during the first three months of the year, nearly double the 900 who lost their properties during the same period of 2008, and up from 1,300 in the final quarter of last year.

Buy-to-let properties accounted for 13% of all repossessions, although lending to this sector accounts for 11% of outstanding mortgages.

A receiver of rent was appointed to a further 2,400 buy-to-let properties during the period, enabling tenants to stay in their home but with their rent paid to the lender rather than the landlord.

However, the CML said the number of landlords who were behind with their mortgages fell slightly during the first quarter, with 2.49% of mortgages in arrears of more than 1.5% of the outstanding debt.

This was down from 2.85% in the final quarter, although the group cautioned that its sample had changed since then.

Sam Younger, chief executive of housing charity Shelter, said: "These figures paint a very depressing picture of thousands of homeowners across the country struggling to keep up with their mortgage repayments, with many more losing the roof over their head.

"There have been moves to help struggling homeowners but some lenders are clearly still not doing everything that they can to keep people in their homes.

"The figures also prove that Government announcements this week to help tenants of repossessed landlords must be implemented as fast as possible."

Bev Budsworth, managing director of The Debt Advisor, said: "It's not surprising to see an increased level of repossessions, though we may not have seen the whole story yet.

"This is mainly due to the Government's pre-action protocol taking effect, extending the period when action is taken on arrears from three months to six.

"We could well see a continued increase in repossessions later in the year after the new six-month threshold is reached."

Liberal Democrat Shadow Housing Minister, Sarah Teather said: “These figures make for grim reading.

“Despite the Government’s attempts to grab headlines with their initiatives, the number of families being repossessed is still rising.

“Ministers should be ashamed that only one family has been helped by their mortgage rescue scheme, months after it was announced to great fanfare.
 
“Mortgage law needs urgent reform to give courts the power to ensure that repossessions are only ever a last resort.”

The Ministry of Justice also released figures today showing that 16,775 people petitioned for bankruptcy in courts in England and Wales during the three months to the end of March - the highest number since it began collecting data in this format in 1995.

The figure was also 29% higher than during the same quarter of 2008 and 9% up on the previous three months.

It was the fifth quarter in a row that the number of people petitioning for bankruptcy themselves has increased.

But there was a 5% year-on-year fall in petitions to have people made bankrupt lodged by creditors, with these falling to 4,535.

There were also 3,461 company winding-up petitions made during the first three months of the year, 13% more than a year earlier and a 2% increase on the final quarter of 2008.

A spokesman for the Department of Communities and Local Government said: "The Government has learnt the lessons from the past and is taking decisive action to help ensure repossession is always a last resort.

"Statutory regulation of mortgages by the FSA is supported by the new mortgage pre-action protocol, and voluntary initiatives by lenders including industry guidance and commitments not to repossess before a borrower is three months in arrears.

But shadow housing minister Grant Shapps said: "Gordon Brown has left us badly prepared for this recession which is taking its toll as repossessions rise. The Government's headline-grabbing schemes are failing hard-working families.

"Three thousand families have asked for help under the £235 million Mortgage Rescue Scheme and yet just one has received assistance, while ministers have finally launched their Homeowner Support Scheme - four months after announcing it - but just 50% of lenders are actually supporting it."