Repossessions Will Rise

I’ve been wondering lately about how much longer the banks can hold out before they decide to start offloading their bad debts.

Many might not realise it, but banks have been pretty lenient with borrowers over the last couple of years.

With the new government gearing up to announce their cuts  in October, it’s clear that several are planned which will effect mortgage borrowers.

The latest forecast from the Council of Mortgage Lenders (CML) predicts there will be 53,000 repossessions in 2010, but a new study has warned that home repossessions could mount to 175,000 in 2012.

Quote:

Delroy Corinaldi, director of external affairs at Consumer Credit Counselling Service says;

“The recovery of the housing market may lead to previously merciful lenders beginning to enforce suspended possession orders,” and “There is no doubt that lenders have shown leniency towards debtors during the recession. However, this leniency may have been partly determined by the markets.”

A Few Facts

1. Interest rates WILL go up at some point. Experts suggest it will be the latter part of 2011.
2. It’s likely that unemployment will go up due to the cuts, some predict by up to 11.4% ( worse case scenario.)
3. The mortgage rescue scheme, (where you can sell part of your property to a local council or housing association via a shared equity deal so that  mortgage payments are reduced, ) will face cuts from 65% to 55%. ( The scheme was heralded by the previous government as a ‘lifeline’ which would help up to  6,000 people. Latest figures show that a paltry 629 households were helped. Woopee! a resounding success then.)
4. The mortgage interest payments scheme (for those out of work ) will be halved from 6.08 to 3.09 % -bringing it into line with the Bank of England’s average mortgage rate.

Although repossession numbers have fallen in the past six months, experts think that we may now be at the low point in the cycle and that numbers may start to climb later in the year. Remember, that banks have been holding on to stock of homes instead of releasing them to the market.

Lenders will soon run out of ways to help mortgage borrowers, and in my opinion, this particular rug could well be pulled away at any time.

The Bank of England have been playing a game of “rob Peter to pay Paul” for some time by bailing out the government and those who borrowed willy nilly and by stealing from savers and investors. Money is leaving the country, and this is bad news.

A large proportion of the much talked about ‘growth’ came from government spending. I’m sure we all remember good old Gordy B saying we should “spend our way out of recession”. Many folks gambled on an ever increasing property value to use as a get out of jail free card. Reality has to hit the market and price corrections will have to follow as the house of cards comes crashing down in the next breeze.

We are already seeing reports that agents are encouraging vendors to be ‘more realistic’ with their asking prices in many areas and that prices are falling.

The fact remains that UK property is vastly overvalued and largely unaffordable, and at some point that has to change, and no amount of tinkering around the edges can alter that.

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