Levels of repossessions falling

Figures published today by the Council of Mortgage Lenders (CML) show that the number of repossessions in the second quarter of 2009 reached 11,400 – down from 12,700 in the previous quarter but an increase of 14% on the corresponding quarter of 2008.

Bev Budsworth, managing director of The Debt Advisor, commented: “It’s encouraging to see that factors in place to curtail the level of repossessions are obviously having a positive effect. The new government pre-action protocol offering people with mortgage arrears a six-month ‘cushion’ before action is taken will have certainly stemmed some of the flow. A record low base rate will also give borrowers in trouble more scope to repay their debts.

“However, we cannot afford to be complacent, other statistics released in the last few weeks point to a depressed economy that is seeing record levels of personal debt and the highest levels of unemployment for over a decade. Levels of repossessions are still high and I believe that this could be a momentary reprieve as signs point to levels increasing once again throughout 2009.”

Employment figures out this week showed the highest levels of unemployment since 1995 with 2.43 million people now out of work. The British Chambers of Commerce also predicted that this level could rise sharply with unemployment topping the three million mark. “It’s clear to me that too many people are still debt laden and simply cannot afford to repay their bills and end up defaulting on their mortgage, or worse, losing their house”, continued Bev.

This inability to repay debt was also echoed in the latest personal insolvency figures which were released by the Insolvency Service last week. Levels of personal insolvency rose to a record high for England and Wales with over 33,000 people being declared insolvent.

Bev explained: “This double whammy is proof that people are still finding it extremely tough as income streams dry up, debt mounts up and the cost of living seems to be continually rising. I think that these factors combined will increase the levels of repossessions for the remainder of the year. People need to remember that their mortgage is secured against their house and if they fail to pay their mortgage, they risk possible repossession and losing their homes.

“Times are tough but help is available. The key to combating mortgage arrears is by engaging your lender at an early stage and not just giving up and handing the keys back. There is help out there and options available to ease the pressure and keep the roof over your head.

“Speak to your lender as early as possible. Do your homework, work out what you can afford to repay with a simple income / expenditure calculation and present them with a solution, not just a problem. It’s always worth remembering that you can reduce your outgoings on unsecured debt by considering an Individual Voluntary Arrangement (IVA) or debt management plan – you must always prioritise your secured debts such as your mortgage and any arrears!

“There are signs that the housing market is beginning to pick up. In June, the number of mortgages granted to homebuyers was up by 23%, a figure that has been buoyed by the record low base rate. House prices are also marginally up month on month meaning that there will still be a vast amount of people with a healthy level of equity in their property. We are still seeing these ‘asset rich but cash poor’ people struggling with their household expenditure and simply giving up – a scenario made worse when you consider that the types of property with a good level of equity tend to be high-end detached houses that are simply not selling in a depressed housing market.

“My advice would be to always seek professional help and see if a tailored debt solution, such as an IVA, can help avoid bankruptcy and the potential loss of your home. Bankruptcy is a growing worry with the Insolvency Service recently reporting nearly 19,000 bankruptcies from April to June – a 15% increase on the same quarter in 2008. The most worrying aspect is the area of bankruptcy on the biggest increase is the debtor’s petitions where people are simply throwing in the towel.

“If you have a property with equity, you need to avoid bankruptcy at all costs as, not only may you lose your home, but the really frightening part is that bankruptcy could cost you thousands for the privilege and only 20% of all bankruptcies return any funds to creditors!”