UK repossessions eased in spring

Homeowner faces repossession

The number of homes repossessed in the UK fell 10% in the second quarter of the year compared with the previous three months, lenders say.

But the 11,400 homes repossessed was a rise of 14% compared with the same period the previous year, the Council of Mortgage Lenders (CML) said.

The group said early advice for struggling owners, low interest rates and tolerant lenders were helping.

But rising unemployment could soon leave more householders in difficulty.

Arrears

Low interest rates also meant that the number of homeowners falling behind with their mortgage payments had also levelled off.

MORTGAGE RESCUE SCHEMES England: 15 families now living as tenants in homes they used to own Wales: 70 families completed similar scheme Scotland: 105 households completed since March Northern Ireland: Scheme "ready to go" but awaiting funding Are government schemes helping? 'I wasn't offered other options' Help if you are facing repossession

The number of home loans with arrears of more than 2.5% of the mortgage balance in the second quarter of 2009 was 205,600. That compared with a total of 203,900 at the end of the first quarter, and 139,700 at the end of the second quarter of 2008.

However, separate figures from the Ministry of Justice gave a hint of a future rise in repossessions in England and Wales.

The number of repossession actions started in the courts bounced back in the second three months of the year, rising by 10% compared with the first three months of the year to 26,419.

The number of repossession orders granted by judges also rose over the same period, up 16% to 19,123.

Homeowners can still negotiate with their lender at this stage of the process to stay in their home. Nearly half of these repossession orders, 46%, were suspended as judges allowed borrowers to negotiate a deal with their mortgage lenders.

Warning

The CML also sounded a note of caution about the coming months, although it suggested the figures showed that lenders were not aggressively seeking to throw people out of their homes.

"With unemployment rising and the economy still weak, the outlook will remain challenging for the rest of this year and into 2010," said the CML's head of policy Jackie Bennett.

"Clearly, low interest rates are also helping borrowers who are committed to working to resolve their arrears, paying what they can - and when they can - towards their mortgage, and maintaining good communication with their lender."

The CML recently reduced its estimate for repossessions in 2009 by 10,000 to 65,000 homes in the UK.

But homeless charity Shelter has warned of a second wave of home repossessions when interest rates rise.

It said that rising unemployment would also add to the risk of homeowners being unable to make their regular mortgage repayments in the coming months.

"Despite many lenders using more tolerant measures to help their customers, further action is needed if we are to prevent a second and more devastating wave of repossessions," said Shelter director of policy, Kay Boycott.

She called on lenders always to consider allowing homeowners in arrears to move their mortgage from high fixed-rates onto low variable rates, while waiving any redemption penalty charges.

The governor of the Bank of England, Mervyn King, implied earlier in the week that the Bank rate could stay at 0.5% until well into 2011.

So long as properties have paying tenants, landlords now have much greater ability to service mortgage payments and we expect arrears to continue to fall CML

The CML and the government believe that free advice to those who have fallen behind with mortgage payments, and "last-gasp" advice in repossession courts, have allowed many people to stay in their homes.

More intricate projects - such as schemes to allow people to sell their homes to housing associations and live in them as tenants - have had a slow start.

Fifteen families had completed the "mortgage rescue" process by the end of June under a new scheme in England, and the government is setting up a fast-track team to oversee applications from the autumn.

Northern Ireland is still waiting for funding to start the project. Yet, 70 families have been through the scheme in Wales, and 105 families have completed the process in an updated scheme in Scotland since March.

Other people who have started the process have staved off the threat of imminent home repossession, the authorities say.

People on income support or claiming job seekers allowance in the UK are also able to apply for government money to help repay the interest on their mortgages.

New rules

Late last year, new court rules were introduced which were aimed at preventing repossession orders being granted unless lenders had made other attempts to sort out mortgage arrears with their borrowers.

Job losses mean some people are unable to keep up repayments

The introduction of the new "pre-action protocol" last November led to a sharp drop in the number of repossession orders being granted by judges in the first three months of 2009.

In some cases, though, this may just have delayed an inevitable move to repossession, as the borrowers were simply unable to do anything to make satisfactory repayments to their lender.

Arrears among buy-to-let mortgage (BTL) holders fell for the first time in nearly three years, the CML figures also showed.

During the second quarter of 2009, there were 29,400 BTL mortgages which were three months or more behind with repayments. This was a 17% drop from the 35,600 BTL mortgages in arrears during the first quarter.

The CML said landlords in trouble were benefiting from low interest rates on their loans.

"As the majority of buy-to-let loans are on an interest-only basis, these loans will see a larger proportionate decline in monthly payments than repayment loans.

"So long as properties have paying tenants, landlords now have much greater ability to service mortgage payments and we expect arrears to continue to fall as landlords are helped by lower interest rates," the CML added.

The CML said 1,400 BTL properties were repossessed in the second quarter, the same as in the first quarter, though still at a record high.

However, the number of BTL properties where a mortgage lender has appointed a receiver to continue collecting the tenant's rent, instead of repossessing the property, has shot up in the past year.

A year ago, there were just 1,000 homes in the hands of rent receivers, but now that figure stands at 10,800, nearly 1% of all BTL properties.

Separately, the Finance and Leasing Association (FLA) reported that the number of repossessions on second charge mortgages during the three months to the end of June stood at 421, up from 390 during the previous quarter.