Every 14 minutes a property is repossessed

However, an even more sobering fact is that this figure, dramatic as it is, does not paint the true picture.

Currently record low interest rates of 0.5% are keeping mortgage payments down; even so, many homeowners are having to ‘cook the books’ in order to keep up with their repayments. Some people are only managing to keep the roof over their heads by using redundancy payments or even credit cards to make their monthly mortgage repayments – what will happen to these folk if interest rates rise or their partner is made redundant?

Property repossession statistics are compiled by the Council of Mortgage Lenders (CML), but there are some home losses that are not recorded:

Sale and Rent Back Schemes

These are the schemes that effectively allow the homeowner to avoid repossession by becoming a tenant. Their house is purchased by an investor, who then rents it back to the previous mortgagee. These properties don’t appear in the figures, yet they have been ‘possessed’ by somebody other than the original owner.

The Office of Fair Trading (OFT) estimate that over the past few years around 50,000 homes have been sold for rent back and they also estimate that over 25,000 of these were in 2008 alone.

Second and Third Charge Holders

When a borrower defaults on a mortgage, there is a hierarchy of people who must be paid back from the proceeds; the CML collects statistics relating to first charge holders only (i.e. those who must be paid back first). They do not collect data relating to second charges. If a homeowner has taken out a secured loan using his property as the security, the loan company would have second charge on the property – or even third if more than one secured loan has been taken out. So, if somebody has paid off their mortgage but then defaults on a secured loan and has their home repossessed as a result of defaulting on loan payments, that repossession will not appear in the statistics.

Time Lapse

Published figures are, of necessity, historical as it takes around a year after first missed mortgage payments for repossession to happen.

If you are struggling with meeting your mortgage repayments and want to avoid repossession you could consider a fast house sale.

Avoid Repossesion

There are some reputable professional cash house buyers around who can complete a purchase on your property within a month or so. To achieve this they will sell your home at below market value – usually they get around 70% of the current value of your home. It’s not ideal, but it is a solution to a very worrying problem. You could also consider a sale and rent back scheme, as outlined above.

Make the first move in selling your home fast or sale and rent back by following the link and filling out the form.

Despite the improvements, lending levels for investment landlords are a drop in the ocean compared to the market’s zenith in 2006 and 2007, when lending was an astounding £12.4 billion for the third quarter of both years – we have a way to go yet. And there lies the opportunity.

Michael Coogan, director general of CML (Council of Mortgage Lenders), wonders “whether there will be sufficient supply side capacity to meet … demand, as the number of buy-to-let lenders dwindled in the credit crunch after 2007 and is yet to be fully restored.” If that’s not a call to arms, I don’t know what is. The CML expect the buy-to-let demand to pick up further, based on rising rental trends and broadly stagnant house prices.

Currently there are around 309 buy-to-let type mortgages available, quite an increase on the 185 products that were on offer at this time last year; proof, if any were needed, that the lenders have realised that demand is strong. However, in July 2007 there were 3,648 products available.

There another positive note too – CML statistics show that there were 1,500 properties repossessed from landlords in the third quarter of this year, 100 fewer than in the previous quarter. Although that still seems like a high figure, when you realise that it’s just 0.12% of all buy-to-let mortgages, it doesn’t seem so dire after all.

Speaking about the newly published report,  BHF’s Director of Policy, Ian Fletcher, said:

Many lenders simply threw money at buy-to-let borrowers during the boom without sufficient checks on who they were lending to or what they were lending for.  Consumers have suffered as their buy-to-let dream turned sour and many buy-to-let lenders were at the root of our economic problems as organisations, such as Bradford and Bingley, found themselves over exposed to bad loans.

The BHF comprises a whole range of industry members: property developers, property owners, fund managers, investment banks and professional organisations, and this report has been backed by leading UK estate agents, Savills.  Savills Private Finance director, Mark Harris, said:

The buy-to-let market has borne the brunt of the credit crunch and, with a dearth of suitable finance available for professional landlords, we could well see an increase in repossessions.  It’s vital, therefore, that measures are in place to ensure the private rental market can continue to expand.  Better regulation is therefore needed if we are to move from an age of recklessness into a period of responsibility.

The BHF report comes within weeks of news that Britain’s leading mortgage lender, the Lloyds Banking Group, has imposed stricter rules on buy-to-let lending. On 14th September, it was reported that the Lloyds Banking Group, which is majority owned by the taxpayer, will restrict the buy-to-let investor to a total of nine properties across all of its brands.

The Group includes such brands as:  Lloyds TSB, Cheltenham & Gloucester, Halifax, Bank of Scotland, Intelligent Finance, Birmingham Midshires, Scottish Widows Bank, and The Mortgage Business.

The restrictions go even further, with no single individual being allowed to borrow more than a £3m total against rental properties across these same brands.

According to the latest figures from the asset manager Young Group, the buy to let investors are returning to the market. The Young Index for Q1 2009 said that increasing numbers of residential property investors are looking to purchase new UK properties in the next 12 months.

This represents a 33% increase over the last quarter. Most are looking to buy in London, with at least 40% seeing the capital as the best place to invest in new residential assets.

Approximately 50% of those surveyed said they believed that London prices will be either at the same level or higher by this time next year.

Most interestingly they expect to hold each investment asset for the next 11 years. The index surveys 500 investors across the UK.

Are you surprised that buy to let investors intend to hold onto properties for such a long time?

Original article by Sharlene Goff at FT.com – Updated and additions by HouseRepossession.co.uk

Investors who are partly to blame for the state in borrowing, are up in arms that the current buy-to-let mortgage products offer poor interest rates when compared to the base rate and in fact other mortgage products.

We are aware that the drop in property prices has tempted the keen investors back into the market with low prices, good rental prospects showing a keen yield.

Estate agents have reported a substantial increase in inquiries this month. Cluttons, the London-based agent, for example, said it had the busiest January in five years by number of inquiries.

Yet the enquiries are hard to find banks to back them. With only the cash rich, those who can cover a 40% down payment on a property able to lap up the cheap prices. Which in our mind is a good thing, it prevents the market over heating again and if you are in a position to invest in buy-to-let then you should be doing this from a cash rich position, not mortgaged to the hilt.

The average two-year fixed rate on a buy-to-let mortgage has remained at approximately  6.3 % for the past 12 months, according to Moneyfacts.co.uk. During this time the base rate has fallen from 5.5 % to 1.5 %.

The difference between buy-to-let and base rates is because falling property prices have prompted lenders to pull away from buy-to-let, which they view as a greater risk than standard residential business.

The number of buy-to-let mortgage deals on offer has fallen more than 90 per cent in the past 18 months, and the banks that are still lending are demanding larger deposits and higher rental payments.

The lack of finance is proving a big obstacle for buyers waiting to re-enter the property market.

“We have received a lot of calls so far this year from clients who think this is the moment to buy,” said Lindsay Cuthill, a director at Savills “But the hoops through which they have to jump to secure finance are dissuading some from getting involved.”

Most buyers need a 20% deposit to even have a chance of finding a buy-to-let deal and this will be at the high end of the interest rate curve, think closer to 40% LTV to get a good deal. Landlords with a deposit of 20 % have only 15 deals to choose from. The Post Office became the last lender to withdraw its 85% loan-to-value deals this week.

We understand that a year ago there were more than 1,000 buy-to-let deals available for landlords with a deposit of 15 % or less, now there are none. Quite incredible and a true reflection of the banks showing prudence and an aim to build up their loan books with quality mortgages.

The smart investors are finding the cash to buy cheap repossessed properties or simply a good deal when they see one. They will wait for the sharp rise in property prices as LTV’s are relaxed and then leverage against this capital growth in the future. Some deals are too good for the investors to pass on.

James Mannix, head of residential investment at Knight Frank, said banks were only willing to provide funding to professional investors if the properties had yields of 8-10 %, and even then they only wanted to lend 50-70 % of the property value. This is similar to the commercial property market where LTV’s are at around 60% maximum and only on properties with long terms rental income (10 years +) to strong covenants.

Many landlords would now struggle to secure a high enough rental yield to cover their mortgage payments. Lenders have introduced tougher criteria on how much rent is required and, while capital values have dropped, rents also fell towards the end of last year.

What property yields can you find? Any buy-to let bargains out there offering 10% or more return? Let us know below….