So we’re off again with house repossession figures and the Council of Mortgage Lenders (CML) releasing the year’s first three months figures. Each time they do this I get on my box - I have to as no-one else raises the same concerns about the truth behind these numbers.
Are you one of the many being fooled into thinking that just because the CML are forecasting that around 40,000 homes will be repossessed by mortgage lenders by the end of this year that things are nowhere near as bad as in the 90s when over 75,000 homes were repossessed in one year alone?
Let’s cut to the chase; although the statistics are collected correctly by the CML, in my humble opinion they do not accurately reflect current market conditions and account for other factors which come into play, making the situation far different from how it appears. Here are my thoughts.
The impact of ‘Sale and Rent Back’ Schemes
The first area to look at is the number of homes being sold by families to private landlords under 'Sale and Rent back’ (SAR) schemes, or flash sales. These schemes weren’t around in 1991 at the height of the last repossession crisis when around 75,500 homes were repossessed.
Back in October 2008 The Office of Fair Trading (OFT) said, ‘It is likely that there are upwards of 1,000 firms, together with an unknown number of non-professional landlords, who have conducted about 50,000 transactions to date’. That’s three years ago!
So do we know how many homes last year or this year that has been or will be sold under the SAR scheme in order to avoid repossession and which therefore not appear on the CML register?
Only first charge holders are recorded in the figures
Another damning factor is that the CML do not record second charge holders. These are lenders with secured loans on the property but the CML only record first charge holders, the main mortgage. Why?
CML uses old data to make the repossession figures
Another point to look at is that the data put out by the CML is technically out of date as they can only record repossessions that were finalised during the year.
It can take between 6 and 12 months to have a home repossessed, even longer now with the introduction of various government backed schemes (see below) and these latest figures for 2011 are based upon householders who experienced financial difficulty up to almost a year ago.
So all those home owners who are missing the first payment this month and can no longer meet their mortgage payment, in theory will not surface or appear on the CML register until possibly next year!
Government backed scheme
The Mortgage Pre-action Protocol, which commenced back in 2008, is one example of a government backed scheme, which could be a delaying factor in eventual repossession for some home owners, just postponing the inevitable and adding further debt and eventual repossession through deferred payments.
Credit card and redundancy payers
There are an estimated one million people using their credit cards to meet their current mortgage commitments. Wow! And don’t forget those who are using their lump sum from redundancy as well.
Historic low interest rates since March 2009
Many households would have had their homes repossessed if Bank of England interest rates were at the same levels as in 1991 (Feb 13% dropping to 10.5% by Sept) at the height of repossession figures compared to the current 28 consecutive month run of the Bank Rate being at 0.5%.
How many mortgage holders are there on Tracker and Standard Variable Rates (SVRs) paying around a third of what normal payments would be because of the current 0.5% Bank of England rate?
How many are twitching every time the Monetary Policy Committee meets to decide whether rates should go up? More to the point, where would the housing market be if we had interest rates comparable to those back in 1991?
Through all this there is a positive side however. Some house owners are paying over the top each month in order to get their mortgages down and so they will not be complaining. Are you one of those or are you a twitcher?
Read article and further stats House repossessions rise 15% (260 words)
