Friday, August 3, 2007

It’s Official – Repossessions up 30% on last year

Home repossessions 'on increase'

I reported this 6 months ago and now it's 'official' and out in the open as overextended borrowers get their collars felt by the lenders.

Posted by enuii @ 11:32 AM (373 views)
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25 thoughts on “It’s Official – Repossessions up 30% on last year

  • Actually, if you go to the original CML article you will find that they have revised past repossession figures upwards. The first half of 2006 was increased from 8,100 to 10,800 (33%!!!). There is no real explanation as to how they got the figures so wrong, just that the methods they were using didn’t reflect the true nature of repossession statistics. I’m no conspiracy theorist, but I find it awfully convenient for them that (1) the past figures have hidden the true picture, (2) they are able to bury bad news well after the fact, but more improtantly (3) by upping previous figures they can now limit the year-on-year rise to a figure of 30%, when based on previously published results the headline should have read “Repossessions up 73% in a year!”. ….. They wouldn’t be out to mislead us would they?

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  • But it’s still only 14,000 houses. I can’t see that being enough to start a crash and mortage arrears are down. Having sold to rent in 2005, I’m now starting to think it’s never going to happen…..

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  • captain sensible says:

    Don’t forget that economic changes happen at the margins – a quick look at the land registry figures indicate, relatively speaking, how few properties change hands each year. I don’t know how many forced and panic sales will be needed to cause a crash, but it will probably be far less than you might at first assume. Patience is definitely a virtue in this environment!

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  • planning4acrash says:

    Sara, a slight rise in properties on the market plus a slight fall in buyers plus a credit crunch equals a large change in supply and demand. Markets change fast when supply and demand act in unison.

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  • C'mon Correction says:

    These figures will be on an upward curve for the next five years. It takes years of slow boiling for people to get burnt. Interest rates have and will be rising and they normally take a few years to have full effect – hence the BOE 2 year inflation watch window.

    I can not see how people are going to escape the huge amounts of leveraged debt they’ve taken on over the last few years. Worst effected will be anyone who has bought a house in the last five years, even worse if they took 100% mortgages or have re-mortgaged since then.

    I can’t believe there are so many people still really blind to it all. In 5 years time they will look back and wonder how niave they were when sat in a building society signing their name under a mortgage 6+ times their wage.

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  • bidin'matime says:

    Sara – I too sold to rent in 2005, and like Captain Sensible, I believe that patience is a virtue. Just wait for the 2 year deals to phase out and you will see that default rate double and double again. Once the banks see that the market has topped, they will be more restrictive on lending, then it’s downhill all the way – no more re-mortgaging to be able to meet the payments (not to mention settle the credit card bills..) – it will be SVRs all round and financial disaster for so many. Except for us and anyone who didn’t think we were totally mad, of course…

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  • holding out says:

    I too sold to rent in 2005. I must say I actually prefer renting to owning. We’re having a new boiler and central heating installed – I believe it’s costing 2.5k – Thats 4 months rent!

    The only down side is watching prices keep going up and in hindsight I wish I’d sold yesterday. However I’m more confident now than I’ve been in a long time that we’re not far away now. That said it will not happen overnight and not only will patience be required to wait for the start even more patience will be required to wait for the end which may be several years.

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  • To those of you waiting 2 years for a 20-30% crash all I can say is ‘whoops!’, in the last two years, surely prime property has gone up by that much? Even if you buy today and you are buying a home not an investnment per se, then after 3-4 years it all comes out in the wash. Surely the trick is not to borrow more than you can afford to pay back and always assume a 1.25%-2% i rate rise might hit you. If you can afford that then BUY! According to today’s stories yet another 400,000 people are headed for our shores – hardly likely to result in housing over-supply is it?

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  • Tremours before the quake! – I sold out two years ago and bought a narrow boat. The surplus equity was invested into the stock markets and high interest deposits. Since then the market returns have been greater than the increase in average house price index and the amount i have been able to earn on deposit has gone up 50%! My outgoings have also been slashed. – The result is, i now have a life of tranquility not knowing (or caring) the time of day or the day of the week.
    The crazy rise in house prices ( fuelled by the events of 11th September 2001 – when banks throughout the world slashed interest rates to help revive a traumatised and stagnating U.S. economy) provided some of us with a way out of the silly, material rat race.
    It also provided the less guarded with a means of cashing in on the ‘money for nothing’ culture. Many remortgaged their homes to pay off debts only to fall into debt again further down the line. Others have spent money on those material things (holidays,cars,electronic goods etc) that not long before seemed to be unaffordable out of earned income. All this spending of ‘magic money’ created demands in the economy which resulted in high levels of employment which in turn has meant healthy tax receipts for the exchequer which in turn has meant the chancellor has been able to increase public spending creating even more jobs. – A virtuous spiral you may think! – Certainly if you have been lucky enough to have owned property during this time, you would be justified in believing you have ‘never had it so good’. If, on the other hand, you have been a tenant or have been naive enough to have bought a property in the last two years you might not share the same sentiments……….

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  • …..(tremours before the quake no2) …Property market conditions have effectively stopped the supply of first time buyers into the market. Higher interest rates mean buy to let properties no longer makes economic sense – the rent no longer covers the mortgage payments adequately. In the domestic market,low cost fixed/capped rate mortgages are gradually maturing (and are needing to be renegotiated at much higher payment levels). Home information packs are also being introduced over the next few months (for everybody) and this will dampen owners enthusiasm to put the house on the market ‘just to see what happens’. People with large sums to invest will suddenly discover they can earn more interest on deposit risk free and still have access to their cash. Buy to let landlords will wake up and discover that if they sell their property now and invest the equity they will earn a higher net income and remove all their debt and risk. Property speculators holding on to empty property in the hope of capital appreciation will start to realise it not going to happen – common sense or financial necessity will result in a sale.The recent large influx of immigrants will be slowed down by government intervention resulting in a slow down for rented accommodation. – What, i ask you will continue to drive prices up????

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  • planning4acrash says:

    In the mean time you can save up a larger deposit, etc. for when you buy again!

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  • will the decline in house prices be quicker this time round as it has been such a meteroric increase and homeowners ,sorry investors, will be quicker to sell up if they see a reduction in house prices. Although its fair to say that I’m naively hoping what goes up quick will drop quick, as I’m dying to get on with my life, I hate renting, I’m bored waiting.

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  • From CML’s press release:

    “At 14,000, the number of properties taken into possession in the first six months of the year rose by nearly 18% compared with the previous half-year, and nearly 30% compared with the first half of 2006.”

    “This is likely to reflect a number of factors, notably:
    The impact of an increasing amount of sub-prime lending within the overall market, where the higher risk nature of the business means that arrears are more likely to translate through to possessions, and that this is likely to happen at an earlier stage.”

    “In the light of the data revisions, the CML has withdrawn its forecasts for arrears and possessions issued at the start of the year. It will not be issuing new forecasts until it has gained more information to enable it to assess the likely future performance of arrears and possessions within the various different segments of the sub-prime mortgage market.”

    “Michael Coogan, CML director general, commented:

    ‘The sharp rise in repossessions in the first half of this year has been driven by a combination of factors, but the absolute number of repossessions is still low by historical standards. Interest rates are clearly higher than many were expecting, and are set to remain so. And the greater risks inherent in sub-prime lending are resulting in significantly higher levels of repossession in that part of the market compared to mainstream experience. This impact has been underestimated in our past market data, which we have now revised.'”

    I’ve added the bold formatting of course. “the wall”, “the writing”, and “is on” (maybe not today, maybe not tomorrow, but soon…)

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  • As JU might tell us, there is a well known phrase in Japan – “Keep a lid on that which smells bad”

    And just to show off …「臭いものは蓋を」

    (kusai mono wa futa o)

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  • japanese uncle says:

    Paul:

    Well done, but you may wish to make minor adjustment. “Kusai mono wa futa wo” should be “Kusai mono ni futa”, is the correct form, meaning no radical but just the cosmetic solution or rectification, which is exactly this case.

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  • japanese uncle says:

    Correction. ‘is the correct form’ should be omitted.

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  • The Department for Constitutional Affairs keeps track of actual proceedings through the courts. There is a caveat here that not all possession orders are subsequenty enforced (i.e. an order being granted doesn’t definitely = family kicked out on the street), but the graph available on their website is nevertheless quite interesting when compared to all the VI comments about, “levels of repossessions being nowhere near the highs of the early 1990’s”, etc. As you can (hopefully) see below, things aren’t quite as far away from those dark days as they would have us believe:

    graph showing mortgage possession actions

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  • uncle chris says:

    Hmmm – interesting graph DUGMUG. I wonder if the 500,000+ mortgages coming up for renewal over the next 12 months will provide that aditional boost back up to 1991 levels?

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  • You may not all like David Smith, but take a look at his site. The numbers of mortgages over 3 months in arrears are 140,000.

    I have appeared before some mortgage repossession hearings and the District Judge looks at 3 months as really the deciding factor, particular where there is little equity.

    I actually sympathise with these people because they were sold a dream that they could not realise I think it should be the banks and the BOE in the dock myself …

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  • Declan Curry presented an interesting article this morning on BBC Breakfast’s business slot.

    It appears that there are now companies specialising in offering to buy houses from those facing financial hardship, and allowing the owner to rent the house after he sale has taken place.

    Its a new way of avoiding repossession so this factor makes comparing repossession figures now with repossession figures from say the early nineties more complicated.

    What worries me most is the level of indebtedness in the UK economy. If a trend for bankruptcies really got going there may be no stopping it with potentially catastrophic consequences for the wider economy let alone the housing market.

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  • Dugmug excellent graph.

    As most economists say it takes 18 months for an interest rate hike to take effect. In that case the first rise a year ago has still not had it complete impact. The others will follow.

    This is sub prime as mentioned in the report today as well. Its not the interest rate rises for sure.

    Also the massive fixed mortgages which will come to an end this autumn will be interesting to watch.

    So the next few months will be a good ride for HPC

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  • Just been scanning the Scandanavian press. One of the well known financial publications has an article with the title “The crisis reaches the UK “. They have quoted the scenario above with repossesions, rates that haven’t bitten yet etc and they expect the UK property market to go the same way as the US.

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  • Actually Japanese Uncle, I prefer the Japanese phrase:

    “Deru kugi wa utareru” – The nail that stands up must be pounded down

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  • Hi Guys – thanks you’ve cheered me up I’m back on the wagon

    Nigwell – you sound like my husband! In 2005 I thought it would drop 20-30%. Now who knows!
    Roger – Wish I’d been as brave as you (especially this year), but we already have money in the markets and I believe in spreading risk. So the cash is tucked away in various saving accounts and of course Ernie. He’s done us proud in the last couple of years.
    Planningforacrash – save for a deposit! Are you crazy , with inflation running away 😉
    Yes- dying to get on with my life, I hate renting, I’m bored waiting. That’s exactly how I feel. I think I came to renting with the wrong attitude. To anyone else just starting to rent my advice is replace the curtains with something that’s more you, don’t hang pictures at odd heights just because you don’t want to make more holes in the wall and replace the electric hob for gas – if that’s what you prefer. On the other hand our landlord has definately spent more money on repairs – over a year’s rent.
    Dugmug – love the graph.

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