Mortgage Arrears - Property Under Threat

It is no consolation whatsoever if you are facing the risk of your home being repossessed to be told that there are many thousands of others in the same traumatic position.

There are also many in the worse position of having already lost their homes either recently or in past financial crises the stress of such a situation is difficult to imagine but easy to sympathise with. With no sign of lending by the banks becoming easier to obtain, the news is not good.

In fact according to the Council of Mortgage Lenders (CML), during the third quarter of 2008 there was a 12 percent increase in the number of repossessions. This figure is shadowed by the numbers in arrears which is showing an 8 percent increase according to the CML. Of course not all of these will end in loss of a home; many will manage to put their finances in order to meet their new circumstances, or even gain employment and have income for mortgage payments.

However, with the number of jobless on the increase as now reported on a daily basis, it would appear that the numbers of unemployed will continue to rise, with commensurate increases in the numbers of those in arrears and homes at risk of repossession.

The last year when the difficulties for homeowners were worse than this was 1991 when there were 75,500 repossessions. This is to be compared with 2007 when there were 26,200 in total for the whole year, but it is not unreasonable to assume that the figures for 2008 will be markedly higher than this, although no one is trying to guess just how much higher they will be.

One major difference between 1991 and the present day in financial responsibility for homes is that in the former times the occupier was usually directly responsible to the mortgage lender i.e. the bank or building society, with whom the situation could be discussed and in some cases a compromise could be found. Since that time there has been a major increase in the volume of a buy to let properties, so a landlord comes into the equation.

Many of those who took on mortgages for property with a view to letting did so on the back of a general feeling that bricks and mortar are always a good investment and that income from rents could cover mortgage costs. This meant that over a long period property ownership could increase with no major direct cost to the mortgagee.

A good theory! Unfortunately many who opted for buy-to-let did so with no great amount of cash available for emergencies, and they also took advantage of the low cost fixed rate deals which were available on mortgages at the time. With inopportune timing many of these fixed rate mortgages have ended or are currently reaching termination, and there are no deals available now which come anywhere near the previous cheap rates. So landlords are having to find extra funding to cover their increased borrowing costs, and are finding the search to be largely fruitless. This places the tenants home in danger, even though they may have paid their rent always in full and on time.

It is worth reminding ourselves that the government have pumped vast amounts of (our) money into the coffers of the lenders to ensure that they remain able to service our mortgages and they have been obliged in return to sign an agreement by which all avenues are explored before repossession becomes unavoidable. They have to be held to this agreement, but their past record does not inspire confidence. Maybe the last resort option will lie with the government, for whom the direct support of those in difficulties with their mortgage would be a small cost when compared with the billions already handed to the lenders.

Seed Newsvine

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