Repossessions increase with more on the way

The number of properties being repossessed grew 12% in the third quarter of 2008, with 11,300 borrowers having their homes seized after failing to keep up with their repayments.

Problems with payments resulted in 29,516 repossession orders being made by courts in England and Wales whilst the report, released by the Council or Mortgage Lenders (CML), revealed that 168,000 mortgages were now in arrears – a rise of 8%. That figure looks almost certain to hit 170,000 before the end of 2008.

Biggest hit by the current economic crisis would appear to be buy-to-let landlords, with arrears on buy-to-let mortgages now higher than on typical mortgages.

Falling rents, an oversupply of rental property in certain areas has left many landlords struggling to generate enough revenue in rent to maintain repayments on loans attached to the property.

However, the number of buy-to-let mortgages that ended in repossession didn’t see an increase, remaining at a stable 900.

The figures reflect the growing economic trouble faced by homeowners as spiralling debt problems and unavailability of mortgages, particularly to those with high LTV (loan to value), force up the cost of living. Growing unemployment has also been a contributory factor, with the number of jobless expected to hit 3,000,000 in 2009.

Despite the figures, the CML tried to reassure homeowners that repossession was seen as a “last resort” for lenders.

"The CML and lenders are absolutely committed to ensuring that repossession is only ever a last resort,” read a statement. “Most borrowers who face payment problems successfully keep their home by working with their lender - anyone worried about mortgage payments should contact their lender at the earliest opportunity, before arrears start to build up.

"Looking ahead, conditions in the wider economy suggest a worsening picture for mortgage arrears, however carefully lenders handle their treatment of borrowers in difficulty. But while lenders cannot change the underlying causes of financial difficulty, such as unemployment, they can make sure that their response to borrowers is constructive and seeks to avoid repossession wherever other solutions can be found.”