Friday 15th May 2009

Figures published today by the Council of Mortgage Lenders (CML) show that the number of repossessions in the first quarter of 2009 reached 12,800 – up from 10,400 in the fourth quarter of 2008 and an increase of over 50% on the first quarter of 2008. However, the CML now thinks that its 75,000 forecast for 2009 looks pessimistic and expects to revise the figure downwards in its next housing market forecast update.

Bev Budsworth, managing director of The Debt Advisor, commented: “It’s not surprising to see an increased level of repossessions, though we may not have seen the whole story yet. This is mainly due to the government’s pre-action protocol taking effect, extending the period when action is taken on arrears from three months to six. We could well see a continued increase in repossessions later in the year after the new six month threshold is reached.

“The key to combating mortgage arrears is 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 at the earliest stage 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!

“The market is in a period of flux at the moment where lenders are struggling to maintain the economic viability of some of their mortgage books. This is particularly true where lenders are also not underwriting new mortgages, such as Future mortgages (part of Citibank) and Advantage (part of Morgan Stanley). This is good news for borrowers as lenders such as these are keen to liquidate their books, opening up extensive opportunities for negotiation. We’ve seen a growing trend of lenders allowing borrowers with remortgage offers of a lower value than their current mortgages to settle their mortgage with a hefty discount.

“We still see many cases of borrowers who are ‘asset rich but cash poor’, they still have a healthy level of equity in their property but rising prices or job losses have meant that they are struggling to meet their household expenditure and mortgage repayments. They see their only way out is to sell up but they are generally high-end detached houses that are simply not selling in a depressed housing market.

“My advice to these people is always to seek professional help to see if a tailored debt solution, such as an IVA, can avoid bankruptcy and the potential loss of their home. Bankruptcy is a growing worry with the Insolvency Service recently reporting levels of bankruptcies reaching new records. 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!”

Posted 15/05/2009 15:26:06