Page last updated at 12:03 GMT, Friday, 20 February 2009

Home repossessions rise to 40,000

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A homeowner tells his story

The number of homes in the UK repossessed by lenders rose last year by 54% to 40,000, according to the Council of Mortgage Lenders (CML).

Despite the recession, the CML said this was fewer than it had originally predicted, but it expects repossessions this year will reach about 75,000.

It said lenders were making "strenuous efforts" to ensure repossessions were a last resort.

But it also reported a sharp rise in homeowners handing back their keys.

"We strongly urge borrowers to contact their lender and work with them before taking this step, as there may be other solutions," said the CML's director general Michael Coogan.

"Borrowers are still liable for their debt, even if they leave the property, so working through their problems is much more likely to be in their best interests," he added.

Arrears

The level of arrears among mortgage borrowers also became worse as the recession gripped the economy.

We're putting in place this comprehensive package of measures to try and reduce the risk of repossession as much as we can
Iain Wright, Housing Minister

By the end of last year, 182,600 mortgages had arrears worth 2.5% or more of the outstanding balance owed to the lender.

That amounted to 1.57% of all mortgages currently in existence.

That was up sharply from the 1.08% of mortgages with this level of arrears at the end of 2007, and the 1.29% of mortgages in this position at the end of September of 2008.

Housing Minister Iain Wright said the government had announced several initiatives designed to provide tailored support to people who risked losing their homes.

"For every repossession, it's a tragedy for somebody - for a family or household - so we have to continue to be focused and determined to minimise as much as possible the risk of repossession," he said.

"That's why we're putting in place this comprehensive package of measures to try and reduce the risk of repossession as much as we can."

But shadow housing minister Grant Shapps said the government was partly to blame.

"Gordon Brown is hampering, not helping, hard-pressed families across the country as nationalised banks such as Northern Rock pursue very aggressive repossession policies," he said.

Initiatives

The government has pledged money for a number of initiatives to help homeowners struggling with their mortgage repayments, primarily because of redundancy.

They can claim income support to help with mortgage interest payments much earlier than before, while housing associations are being given money to rescue some homeowners by buying their properties and taking them on as tenants.

In addition, other homeowners who have seen their incomes drop sharply will be able to apply to their lenders to have part of their repayments deferred for up to two years.

The Royal Institution of Chartered Surveyors (Rics) said the government's plans appeared to be having some effect.

"In spite of increasingly difficult economic circumstances, both the number of houses taken into possession [in the fourth quarter] and the number of mortgage possession actions issued actually fell," said Rics senior economist Brigid O'Leary.

"However, the proportion of mortgages in arrears continued to increase, and that trend is likely to continue as economic circumstances deteriorate."

Court actions

Figures from the Ministry of Justice (MoJ) - also released on Friday - reveal that a protocol that ensures lenders give some breathing space to homeowners who have fallen behind with their repayments could be having an effect.

Repossession orders - by region
London: 3,751 (up 18%)
Midlands: 5,843 (up 19%)
North East: 4,356 (up 17%)
North West: 4,297 (up 8%)
South East: 4,855 (up 10%)
South West: 2,378 (up 20%)
Wales: 1,770 (up 1%)
Source: Ministry of Justice
All figures are for last three months of 2008 compared with the same period a year earlier

The ministry's figures show that the situation earlier in the repossession process, when lenders first go to court for permission to take back a mortgaged property, has eased.

The figures for England and Wales show that initial repossession claims - the first stage of the process - stood at 26,008 in the last quarter of 2008.

That was 32% lower than in the previous three months, and 29% lower than in the final three months of 2007.

"At this early stage is not clear to what extent the launch of the [protocol] has led to a permanent fall in the numbers of new mortgage possession claims being issued, as opposed to some merely being postponed," the ministry said in a statement.

Guidance

The guidance, introduced at the end of last year, means that County Court judges ensure that all lenders demonstrate that they have tried to discuss and agree alternatives to repossession, and that court action is not taken within three months of a borrower missing a payment.

Repossession graph

The number of court orders being made by county court judges - the next stage in the process - stood at 29,095 in the final three months of 2008.

This was 14% higher than the same period a year ago and broadly the same as the previous quarter.

Regional figures show that the biggest rise in repossession orders was in the South West - up by 20% to 2,378.

The smallest increase was in Wales, where orders rose by 1% to 1,770.

Not all of these will lead to actual repossessions, as an agreement is often then reached between the lender and the borrower.

Buy-to-let

The past year has seen a sharp deterioration in the position of buy-to-let landlords who still have a mortgage to repay.

In 2007, they were thought to be suffering less than the average homeowner from the effects of the credit crunch.

But the CML's figures reveal that arrears among buy-to-let borrowers are now worse than among homeowners generally.

Landlord have found rent levels squeezed as home owners who cannot sell their homes decide to let them to tenants instead.

Buy-to-let loans make up 10% of the total number of mortgages, but now account for 12% of all mortgages which are three months or more in arrears - a dramatic worsening of their position in the past 12 months.

Last year, 4,000 buy-to-let properties were repossessed, twice as many as the year before and amounting to 10% of all the homes seized by lenders, up from 7.7% in 2007.

Lending to would-be landlords is also declining sharply, with 36,700 new mortgages granted in the last three moths of 2008, a fall of 56% over the same period the year before.

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