Number of home repossessions up 20 per cent as rate rises bite
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Your support makes all the difference.The number of home repossessions leapt more than 20 per cent last year as a string of interest rate rises in 2006 and the first half of 2007 left increasing numbers of borrowers struggling to make their monthly mortgage repayments.
According to figures released by the Council of Mortgage Lenders (CML) yesterday, 27,100 homes were repossessed in 2007, up from 22,400 in 2006, and almost twice the number seen in 2005.
Consumer groups complained that irresponsible lending was to blame and that banks and building societies were not always doing enough to help. Sue Edwards, the head of consumer policy at Citizens Advice, said: "Our evidence shows that lenders are not always doing everything they can to help borrowers in trouble, all too often piling on extra charges and being too quick to take court action rather than being prepared to negotiate affordable repayment arrangements."
She said the current safety nets were "completely inadequate" and called for better quality insurance products, housing benefit for homeowners and the reform of income support mortgage interest.
The Bank of England's Monetary Policy Committee raised interest rates five times between August 2006 and July last year – from 4.5 to 5.75 per cent – causing borrowers' mortgage interest payments to jump by more than 25 per cent in less than 12 months.
Rates have since been cut – by 0.25 percentage points in December, and by the same margin again this week but the credit crunch has forced lenders to increase their margins, meaning fixed-rate mortgages are now more expensive than when interest rates were last at 5.25 per cent at the beginning of 2007.
"A substantial number of homeowners are still facing markedly higher mortgage payments as the cheap fixed rates that they took out in the latter months of 2005 and the first half of 2006 expire," said Howard Archer, the chief UK economist at Global Insight.
"Should the economy slow markedly for an extended period and unemployment starts rising significantly, the number of home repossessions is likely to pick up markedly."
Michael Coogan, the director general of the CML, rejected criticism of lenders but conceded that the number of repossessions was likely to rise further in 2008. He added: "Lenders take their responsibilities to borrowers facing repayment difficulties very seriously, and many go to exceptional lengths to provide debt counselling, reschedule payments, extend loan terms, or, in some circumstances, even allow payment breaks."
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