House Repossessions Ease with the Market Rising

Original article by  Vanessa Houlder FT.COM

The number of people who have lost their home to house repossession fell by 10 per cent in the second quarter to 11,400, according to the Council of Mortgage Lenders. CML said the main factor behind the decline was the forbearance shown by banks to cash-strapped customers hit by the downturn. Which nice banks are these we ask?

Quite rightly though CML argued that the growth in unemployment meant that house repossessions were tipped to rise in the second half of 2009.

Here’s a good solid factoid. The number of house repossessions was equivalent to 1 in 1000 for the second quarter of 2009. That figure is down 10 percent on the 12,700 from the first quarter of 2009 however 14% more than the 10,000 cases in the second quarter of 2008. So year on year this is bad news.

Jackie Bennett, head of policy at CML said that “today’s data shows that lenders are committed to helping borrowers manage their way through temporary payment problems and get their mortgage back on track over time, avoiding possession where possible.”

It seems that in spite of the recession, low interest rates seem to have been the biggest help to those with mortgages. Of course some people are still on fixed mortgages, low base rates do not help them at all. It was also mentioned by CML that government schemes have helped, however from what facts we see these schemes have been a light touch on the overall problem.

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The government admitted on Friday that only 14 people had so far been helped through its “Mortgage Rescue Scheme”, one of its flagship policies to prevent repossessions.

The scheme, set up in November last year, allows people to sell part or all of their home to a housing association in order to stay in the property.

Despite the slow uptake, the communities department said that 454 households were going through the assessment process for the scheme and another 320 houses-holds had been saved from the “immediate threat of repossession” after applying for it.

CML also suggest that the governments pressure on banks to listen to borrowers and work with them on solving the problems rather than pulling the rug from underneath has helped. We would agree, but more because nurturing bad debts is simply good business for the banks, vastly better than selling that property at basement levels losing money for all parties.

The number of cases of arrears of three months or more at the end of June stood at 270,400, equivalent to 2.43 per cent of mortgages, compared with 264,700 in the first quarter and 152,700 in the second quarter of 2008.