Re-possessions of homeowners at a record low!
If we take a step back in time, in the not so distant past of 2009, we will find ourselves at a time where there were a shocking 50,000 repossessions of home owner property! This was as a result of the dire economic situation of the time. Since that time, there has been an increasing pressure on banks, building societies and lenders to show some forbearance for those families who may be suffering from financial hardship.
Overall, lenders and the courts have also come under pressure from the government to not straight away resort to re-possession, but to instead try and work with the borrower to resolve the issues before it led to re-possession.
Paul Smee, the Council for Mortgage Lenders (CML) Director General has addresses the low figures when he stated:
‘Lenders continue to work very effectively to help their borrowers through periods of difficulty when they do occur and borrowers should be re-assured that most cases of arrears can be resolved and will not lead to repossession.’
This has been a key factor in ensuring that 2016 had the lowest number of re-possessions of homeowner property since 1982! Lenders were advised by regulators to look out for any signs that showed that borrowers were struggling and to then take swift action to resolve the matter before it got out of hand.
This could be achieved by changing the mortgage to allow borrowers to pay their loans over a longer period or by reducing the monthly payments.
The Council of Mortgage Lenders (CML) have released figures which show that around 7,700 UK homes were repossessed in 2016 compared to 10,200 in 2015.
As such, the amount of mortgage holders falling into arrears also dropped in 2016. The CML has reported that at the end of 2016 there were about 94,100 mortgages with arrears of 2.5% or more compared with 101,700 at the end of 2015.
Other factors that have helped to keep the number of re-possessions at an all time low include the current low interest rates and a combination of economic recovery with rising wages. The low interest rates have also led to cheaper mortgages. It is interesting to note that many people now have been looking to re-mortgage their properties in order to take advantage of and lock in the low interest rates before the Bank of England decides to increase interest rates again.
This leads us to our next critical point which is that it is important not to be complacent as things can change – interest rates may go up and mortgage rates may also increase. This could lead to rise in re-possessions in 2017.
Only time will tell how 2017 will unfold but there is hope that even if interest rates rise and other factors occur which may cause a mortgage borrower some hardship, lenders are still under a duty to try and assist the borrower to avoid a repossession wherever possible. Let’s just watch this space!