In research carried out by the Council of Mortgage Lenders (CML), some 14,000 homes were repossessed during the first six months of this year - a rise of about 18 per cent compared to the same period last year, accounting for one in 840 mortgages. Meanwhile, this figure was reported to be 30 per cent above the first six months of 2006. Findings from the financial services firm also showed an increase in the proportion of consumers who have mortgage arrears lasting three months or longer.
As of the end of June, the council estimated that 125,100 homeowners were in mortgage repayment difficulties. Although this was down by three per cent from the same time in 2006, the most recent figures are some four per cent higher than from statistics taken at the end of December. The majority of such mortgages (71,800) were reported to be in arrears of between three to six months. Meanwhile, 38,300 have outstanding debts accrued over a six to 12 month period, with 15,000 consumers said to be more than 12 months behind in making secured loan repayments.
Michael Coogan, director general for the CML, claimed: "The sharp rise in repossessions in the first half of this year has been driven by a combination of factors, but the absolute number of repossessions is still low by historical standards. Interest rates are clearly higher than many were expecting and are set to remain so. And the greater risks inherent in sub-prime lending are resulting in significantly higher levels of repossession in that part of the market compared to mainstream experience".
Mr Coogan claimed that the "vast majority" of homeowners will be able to cope with further increases in mortgage repayments, despite a current economic climate where "affordability is stretched". However, those who believe that they will be unable to cope with the extra pressure exerted on their finances were urged to get in touch with their lender to discuss setting up a more suitable payment strategy.
Commenting on the figures, David Stubbs, senior economist for the Royal Institution of Chartered Surveyors, said: "With the housing market slowing into 2008 and interest rates expected to hit six per cent, homeowners slipping behind with their repayments may be left stranded, unable to sell their way out of trouble. Levels are at their highest since the first half of 1999 with 77 homes being repossessed per day".
Earlier this year, a study by the CML indicated that a greater proportion of homeowners' salaries are going towards making secured loan repayments. According to research carried out by the council, first-time buyers are spending some 19.1 per cent of their income on servicing mortgage costs - the largest proportion recorded since 1992. Meanwhile, existing homeowners were also said to face "increased affordability constraints" as this factor accounts for 16.6 per cent of their spending. Stamp duty was also indicated as a growing area of financial pressure, as the highest-ever quantity of people moving home (86 per cent) had to pay the charge in May.
According to Mark Lance, spokesperson for the Repossession Specialist, the impact of the Bank of England's monetary policy committee (MPC) increasing the base rate of interest by 1.25 percentage points over the last year "has lead to three-figure increases on homeowners' mortgage payments". He added that as those consumers on either a discount or variable-rate deal are facing further pressure on their outgoings, in addition to the country's "inflated housing market", more people are set to become "overstretched financially".
He reported that more borrowers are now starting to get behind with making secured loans repayments due to the impact of the most recent interest rate increases on their day-to-day finances. As a result, the spokesperson claimed that although such homes are yet to be repossessed, the number of arrears is due to rise over the next 12 months so "the true figure is only likely to get worse before it gets better".
"Where house prices have doubled or tripled in some areas in the last eight years the question that should be asked is whether people's incomes followed suit, or has the house price inflation fuelled this recent increase", he purported.
Mr Lance added that taking out payment protection insurance (PPI) could provide "peace of mind" for those homeowners who may struggle to make monthly mortgage repayments should they be the victim of an unexpected change to their circumstances such as sickness or unemployment. He claimed that although PPI is not obligatory, it can provide cover to consumers in the wake of unforeseen events such as the recent wave of flooding in Gloucestershire. Consequently, the spokesperson advised that consumers should have a "full understanding" about the terms and conditions of their policy to ensure that they are aware of what eventualities they will be covered for.
As a result, he stated homeowners to ensure that meeting mortgage payments is their "highest financial priority". However, should they beginning to struggle with their finances Mr Lance urged them to seek professional guidance from a specialist advisory service or their credit provider. "Homeowners should proactively approach their lender, before the first missed payment if possible", he said.
Mr Lance also reported that although taking out a fixed-rate deal can help consumers to budget their monthly outgoings, the product may not always be the correct one for everybody. Those who decided to move home during the middle of their contract could be liable to pay cancellation fees if their product is not portable.
Earlier this year, a study carried out by Moore Blatch indicated that thousands of Britons are selling their homes in order to avoid repossession as they continue to struggle with rising mortgage costs. Findings from the company showed that for every home that was reclaimed over the course of last year, at least an equal number was sold by those under the threat of going into arrears. Head of lender services Paul Walshe suggested that as the impact of recent MPC rises begins to have a greater effect on consumers, some of these "hidden repossessions" could be set to become "real".
Both Abbi Rouse & Mark Dawson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Abbi Rouse has sinced written about articles on various topics from Personal Finance, Careers and Job Hunting and Diabetes Treatment. Abbi Rouse writes for All About Loans. Our visitors can apply online for . We also specialise in. Abbi Rouse's top article generates over 49500 views. to your Favourites.
Mark Dawson has sinced written about articles on various topics from Insurance, Personal Finance and Finances. Mark Dawson writes for the the Loan Arrangers where you can and apply online for. Mark Dawson's top article generates over 90500 views. to your Favourites.