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Written by rosalind renshaw

The total number of properties repossessed by lenders last year was 36,200, below the estimate of 40,000 and the lowest annual total since 2007.

However, repossessions this year are predicted to rise to 45,000 and debt experts said it was the calm before the storm, warning that lender forbearance hides the true state of borrowers’ finances.

New figures from the Council of Mortgage Lenders show that repossessions ticked down markedly in the fourth quarter of last year and at 8,500 were nearly 9% down on the 9,300 in the third quarter.
 
Buy-to-let accounted for 5,900 of all of last year’s repossessions, up from 4,700 in 2010. Overall, 0.31% of owner-occupied properties were repossessed, and 0.42% of buy-to-let properties.

Arrears last year were also down on 2010. By the end of 2011, 159,400 mortgages had arrears equivalent to 2.5% or more of the mortgage balance, 7.5% down from 172,400 at the end of 2010. In the buy-to-let sector, arrears were lower than in the owner-occupier sector – 20.06% in the latter and 1.79% in the former.
 
Despite its new data, the CML said it has no current plans to revise its 2012 forecasts of 45,000 repossessions and around 180,000 mortgages in arrears of 2.5% or more by the end of the year.
 
CML director general Paul Smee said: “Low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track.

“This will continue, but in the face of wider economic difficulties and rising unemployment, we are concerned that there will be a higher number of people facing more serious problems in 2012.
 
“Forbearance cannot be indefinite; but for most households, arrears are temporary and can be resolved.”

Bev Budsworth, managing director of debt management company The Debt Advisor, said: “Due to record low interest rates and increased flexibility from lenders, people are still paying their mortgage – but only just.
 
“The CML is predicting 45,000 repossessions for this year so it’s clear that they expect things to get worse, not better. This isn’t great news, especially if you own one of the 101 properties being repossessed every day.
 
“I believe that worse is yet to come and we may only be seeing the calm before the storm.

“Unemployment and levels of repossessions are inextricably linked. The CML clearly thinks that repossessions will rise in 2012 at the same time as a continued rise in unemployment, currently at 8.4%.
 
“We are already starting to see lenders ‘weaning people off’ interest-only mortgages. Today, Santander became the first major high street bank to demand a 50% deposit or equity in order to obtain an interest-only mortgage.
 
“This will be the shape of things to come with lenders eventually trying to switch people away from interest-only mortgages – some 58% of the entire mortgage market.

“I see huge problems for people on interest-only mortgages who have not made adequate additional savings plans and who are being squeezed by their lender to move to a repayment mortgage.

“Add to this, continued volatility in the economy, high prices at the tills and the less than rosy prospects in the job market, and I think we have a ticking time bomb on our hands.”

Mark Blackwell, managing director of xit2, the mortgage and property data exchange specialist, said: “The headline figure may be positive, but it masks serious underlying problems in borrower finances.

“Repossessions are only being kept low by lenders’ generous forbearance policies, which they can’t afford to sustain in the long term.

“These policies are a life support machine for many borrowers.

“There is a block of 30,000 borrowers in serious long-term arrears: it will only take a small downturn in the economy, or a gentle rise in the base rate, to push them into repossession.”

Comments

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    Robert -
    When a property is repossessed who decides what it is worth?

    • 14 February 2012 13:22 PM
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    No one can be as thick as Dave, is this a post from EAT to get re-action? Well only Ranty.

    • 13 February 2012 12:26 PM
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    Nice one Joel, I think you have given the HPC knockers a fascinating insght into the way you think.

    • 12 February 2012 10:04 AM
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    I wouldn't say I was cold-hearted Robert, just pragmatic.

    With regards to possession through redundancy, well isn't exactly what MPI is for. If people dedide not to then they have no one else to blame but themselves; if they couldn't afford the extra 100 quid a month or whathaveyou then they should have given some thought to how overextended they were in the first place.

    In terms of risk, it is exactly a two way street. The danger to the lender is that they forward a mortgage on an overpriced or depreciating asset. So long as the OO keeps up with ther repayments that's their problem; should they default, it's the bank's problem.

    Which is why a depsosit should be demanded (except for the halcyon days of 2004-2007 of course) as security to the lender and to demonstrateone's financial discipline. The larger the deposit, the lower the risk to the lender, the more favourable rates they offer.

    Lastly, as a HPCer I believe forced sales are a natural function of the market and, in part, help regulate the market from overheating too much as they tend to be cheaper than your average 'normal' listing.

    With regards to my renting, that's a secondary argument. Suffice it to say my letting agent would (I hope) have vetted their client first and my deposit is being held in a DPS. Yes he could turf me out with two months notice but as i'm now on a rolling contract I only need to give him one month. Tis the nature of the beast.

    • 11 February 2012 20:29 PM
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    thats right rob....all banks are likely to become insolvent if they aren't already

    we are of course in the middle of a crisis which is why boe has had to bail out the banking system which still cannot stand on its own two feet...ITS REALLY BAD

    here's a few charts for you about japan

    http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e070220

    • 11 February 2012 14:36 PM
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    Actually I do prefer Joel to Sibley's Bastard Child.

    I haven't said that people should enjoy the benefits if homeownership by without the risks associated. A lot of repossessions are a result of job loss over which mortgagees had no control.

    The point of my post was that for whatever reason there is repossession the repossessed have no influence over the eventual sale price of the property and no redress when the property is sold evidentially below open market value and often below forced sale figures, the deposit is considered wholly sacrificial. Perhaps you feel the banks and lenders should enjoy the profits of lending but should be immune from the risks associated

    It is apparent that you think because you are paying your rent on time you are immune from eviction, sadly for you if other tenants within the landlords portfolio are failing to pay their rent on time, you could well get a bailiff's knock when the portfolio is taken back by the lender.
    Did you take out references on your landlord before you handed over your deposit and first month’s rent? Let me guess not. How about checking the integrity of the Managing Agents Client account?

    Fortunately for you Joel there are still people in this world who care enough about the social implications of what is going on and are prepared to do something about it.

    Dave, the evidence I have of Japan is that average property prices are higher than in 1991 and not 60% of the 1991 value as stated. You had better hope your predictions for Central London don’t happen, last summer’s riots will appear like a minor tiff over the last Jammy Dodger at a WI tea party. The levels of portfolio lending means the banks have a potential problem and so do all of the tenants within those portfolios.

    • 11 February 2012 11:46 AM
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    robert may

    Theres plenty of evidence for my figures...but even just googling japan credit bubble shows some tokyo property fell 99% and many by 90%

    I spent time in japan to do a thesis and gleened my figures from their land registry equivilent and speaking to people with real experiences

    I believe is perfectly possible for central london prices to fall 90%

    • 11 February 2012 10:10 AM
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    Robert, it's your prerogative to post under your full name. I think that the internet is full if nutters hence a pseudonym. If it makes you feel any better you can call me Joel.

    Back to your points, you reckon that people should enjoy the benefits if homeownership by without the risks associated? Sounds like moral hazard to me.

    What we do know about these possessions is that despite all the supports available to them (lender forbearance, pitiful interest rates and SMI) they were still unable to meet their debt obligations after signing on the dotted line. Simple as.

    What the lenders do with their assets is entirely up to them. If I fail to keep up my rent the LL will issue me with a Section 21 and tell me to GTFO. He'll then get a tenant in who can pay. Boo hoo.

    My final word on the matter is mortgage protection insurance. If you don't have that then the risk is entirely yours.

    • 10 February 2012 20:33 PM
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    Bystander, as we are discussing Repossession rather than purchase, so No that is not what I said or am suggesting.

    Dave, you might like to check your source of info and figures they are different to anything I can find on the web

    Sibley's Bastard Child, I am posting here unprotected by a pseudonym and you are accusing me of being Faux?
    As for the maths (NB correct English spelling) 84% of repossessions are family owned homes and the other 16%, the bit you are seemingly celebrating, are rented family homes. The tenants of those places will suffer as much if not more, they will often be up to date with their rent and their Landlord will be the one who has pocketed the rent and failed to pay the mortgage.

    • 10 February 2012 16:46 PM
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    Theres idiots and theres Dave, but then I repeated my self!

    • 10 February 2012 16:08 PM
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    Robert May, please spare us the faux moral outrage.

    Until your mortgage is paid off, it's the banks asset.

    Caveat Emptor.

    'Buy-to-let accounted for 5,900 of all of last year’s repossessions, up from 4,700 in 2010. '

    Jolly good, that's made my weekend.

    • 10 February 2012 13:54 PM
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    Cheer up Dave, it could be worse. Looking on the bright side..
    A) it's Friday
    B) we've enough snow here (in the south east) to build our own houses this weekend.

    • 10 February 2012 13:38 PM
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    I think the thing that will shock people is that prices will struggle to recover after falling

    in japan prices are still 40% lower than 1991 after recovering from 70% down

    NOT adjusted for anything at all..a property at 100k would now be worth 60k

    where does that leave buy to let...the next financial disaster waiting to happen

    • 10 February 2012 13:04 PM
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    @Robert May 10:33
    "....in a situation that generally is not of their making or within their control."

    Are you seriously saying that purchasing a property as a residence or investment is beyond someones control? Its one of the most controlled and bureaucratic purchases one can make - solicitors, banks, surveyors all involved. Its lunacy to suggest that someone can purchase property by mistake. These people were directed, informed and guided at every step.
    Further, the 'situation not of their making' is record low interest rates and 58% of all mortgages on interest only.

    The whole country is being sacrificed so that house prices, and therefore banks, remain afloat but it cannot continue forever.
    As soon as the pensioners (ie Tory voters) see their pensions and savings being eaten away, the pressure will build and the worm will turn.
    Interest rates will rise, repos will greatly increase and prices will collapse.
    Thats all there is to it.

    • 10 February 2012 12:38 PM
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    The secret is to grab the deals you are offered when you are offered them.

    • 10 February 2012 12:33 PM
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    So far the UK has imported a debt crisis from the States and been rocked by one in the neighbouring Eurozone. It is clear from this article that the UK's debt crisis is still to boil over.

    • 10 February 2012 12:15 PM
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    @robert may

    Not sure where your getting your mortgage rates from but let us in on the secret! Highest decent ltv out there is 65 % @ 3.5%. Doing the math then i cant see btl giving yields of more than a few percent at the moment.

    • 10 February 2012 12:00 PM
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    An investor landlord who is getting typical 5or 6% yield is unlikely to become bankrupt while they are borrowing at 2 or 3% on an 80% LTV mortgage.
    The portfolio Landlords and the lenders who have leant to them who ought to be sweating are those who are pyramid investing into unsustainable priced properties such as Central London.
    Most BTL portfolios outside central London will remain viable until >2 in 3 properties within the porfolio are vacant for any length of time, that is unlikely while demand is so high and being added to by 101 reposessions a day.
    The pyramids of the late 80's are happening all over again but sadly for FTB's it won't be lots of affordable starter homes that are released onto the market.

    • 10 February 2012 11:35 AM
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    Beware the thoughts of 'Chairmin Dave'.

    He is a tent salesman

    He believes no-one should live in houses or flats

    • 10 February 2012 11:06 AM
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    lets also face it..had interest rates remained at 5.75% then property priced would have fallen 50% by now

    investors who think they are clever,were BAILED OUT, of financial disaster.

    That doesn't bode well for their mentality as the inevitable tales place

    smart money was out of property in 2005/2006

    anyone investing now potentially faces bankrupty down the line

    • 10 February 2012 10:56 AM
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    its not sustainable and the flood of repossessed properties will include the bankrupted portfolios of buy to let investors

    its so obvious...just like the credit crunch..but no-one wants to admit it out of fear

    you can see why the dotcom,credit,and housing bubbles happened.

    This one is going to be dramatic and take everyone by 'surprise'

    • 10 February 2012 10:53 AM
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    Who stands up for the rights of the repossessed?
    I see far too many properties being flogged off cheap by the Asset realisation firms. It seems the already down and kicked Mortgagee has no-one to fight their cause and there is seemingly nothing they can do and no-one who can help when there is injustice.
    Given the pressure on social housing that already exists how can it make sense that 101 families per day are adding to that pressure?
    Perhaps it is time for a little cohesive thinking involving Government and CML, it does not make social or economic sense to penalise ordinary people who are in a situation that generally is not of their making or within their control. It does not take too much thought to work out ways which prevent the lender, borrower and society losing out all round.
    It is morally and socially wrong that a relative few (sometimes artificially) privileged folk are able to buy up repossessions and conceivably rent these properties to the repossessed at a market rent which is often higher than their mortgage payments.
    I have a sneaking suspicion that the Banks and CML could be facing an apocalypse bought about by pyramid lending and that injustice far worse than the expenses scandal will be exposed.

    • 10 February 2012 10:33 AM
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