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Cml Repossession Risk Review

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This is quite a long report in PDF format which you can download from the CML.

Well worth a read if you're interested in the topics of affordability, repossessions and arrears. It looks at the effects of external factors such as HPI, interest rates and unemployment, as well as lending criteria such as LTV and mortgage repayments as % of income.

One little snippet to whet your appetite:

Page 12:

Drivers of possessions

The number of possessions is influenced by longer-term mortgage arrears, debt service burdens, first-time buyers with high LTVs, available housing equity and house price growth (OEF 2001).

The likelihood of a borrower moving from arrears to possession depends on their behaviour, market segment and institution-specific arrears management policies. The current LTV is also important, with the probability of moving to possession rising for higher LTV loans.

Rising house prices are an important protection against possession. They allow arrears management policies such as payment holidays and the capitalisation of arrears to be considered when arrears are unlikely to be a persistent problem. They also provide the equity for borrowers with problems to trade down or change tenure rather than face possession.

[my italics]

This last bit is important. CML are predicting HPI to match income growth over the short to medium term. However, if HPI goes to zero or negative, then the outlook for repossessions looks a lot glummer.

Pages 9 & 10:

NMG Research data from a survey conducted for the Bank of England in September 2005 (Barwell 2006) show that around 65% of mortgage borrowers also had unsecured credit commitments (Table 3). Of these, close to 65% were experiencing no problem with them, 25-30% were experiencing some problem and around 8% considered them to be a heavy burden. Overall, about 5% of mortgage borrowers had unsecured credit commitments that they considered a heavy burden.

So, 35% of borrowers with unsecured debt had some problem or a serious problem. Wow!

Around 8% of all borrowers reported some difficulties with their mortgage payments in the previous 12 months (Table 4). 6-7% of those without unsecured credit experienced difficulties. 8-9% of those with unsecured credit experienced difficulties. Of those with unsecured commitments experiencing mortgage payment difficulties, 10% had no problems with their unsecured credit, 45% had some problem and 45% considered it a heavy burden.

There's more - but go there yourself for the whole report.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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