The number of buy-to-let landlords unable to keep up payments on their mortgages more than doubled during the second half of last year, hitting record highs of almost 27,000.
Meanwhile, the number of repossessions of privately owned homes also leapt – finishing the year up more than 55 per cent on 2007 at 40,000.
The figures, published by the Council of Mortgage Lenders (CML) yesterday, are the latest indication of the extent of the collapse in the UK economy during the second half of last year, as unemployment rose, house prices slumped and GDP growth moved into negative territory.
The buy-to-let sector has been the hardest hit over the past year. The number of landlords who are three months or more behind on their mortgage payments rose by 257 per cent between the end of 2007 and the end of 2008, as landlords failed to secure the rents they needed to meet their loan payments. New lending in the buy-to-let sector has also plummeted, falling by 56 per cent in the final quarter of last year. Although repossessions of private homes increased during the second half of the year, the rise was not as fast as some had feared.
The Government introduced new rules towards the end of 2008, pressuring lenders to give borrowers more time if they couldn’t keep up mortgage payments. This is believed to have helped keep the number of repossessions down, although the Government’s Homeowner Mortgage Support Scheme – which was also announced last year, has yet to be put into place. It is expected to open in April.
Economists and politicians claim that the Government needs to do more if it is to stem the rise in repossessions. “Deep economic contraction, sharply rising unemployment, high debt levels, substantially lower equity and house prices, and more and more people being trapped in negative equity will exact an increasing toll on individuals over the coming months,” said Howard Archer, chief UK economist at the consultants Global Insight.
“While the substantial cuts in interest rates by the Bank of England will obviously help some people, they are likely to be insufficient to save many from insolvency and losing their houses. Government measures to help homeowners in trouble are also likely to have only a limited impact,” he said. “The many people who had to stretch themselves to the absolute limit to get into the housing market in recent years are particularly vulnerable. The more that house prices fall, the more people will be trapped with negative equity.”
In the private housing market, the statistics showed a jump in the number of voluntary possessions – where owners simply hand over their keys to the mortgage company. The number of such voluntary possessions rose 65 per cent to 4,630.
But the CML director general, Michael Coogan, urged borrowers to contact their lender and ask for support, rather than giving up once they run into troubles. “Borrowers are still liable for their debt, even if they leave the property, so working through their problems is much more likely to be in their best interests,” he said. “We know the plethora of schemes and initiatives is daunting, and we are working closely with government and advice agencies to try to simplify the information available, and ensure that those borrowers who may qualify for help get access to the information and advice that they need at the right time.”
The Liberal Democrats blamed the Government for the rise in repossessions, accusing Gordon Brown of “sitting on his hands”. “The much- publicised Homeowner Mortgage Support Scheme announced last year has not yet helped a single family in trouble,” said Nick Clegg, the leader. “The Prime Minister’s wasteful complacency means that millions of extra families could be added to already full social housing lists.
“If the Government was serious about stemming the tide of repossessions, it would give courts the power to ensure repossession is the absolute last resort and remove the barriers to allow councils to invest in social housing.”
What to do if you can’t meet your payments
Talk to your lender
The Government has been putting pressure on banks and building societies to go easy on borrowers who are struggling – and the bank is more likely to give you a break if you call them as soon as you know you are going to miss a payment. Try not to wait until after the event. Ask your lender to let you have a month or two off your payments, or to make smaller payments. They’re more likely to say yes if you can convince them that a break will help you get back on track.
Charities such as the Consumer Credit Counselling Service ( www.cccs.org.uk) and Citizens Advice ( www.citizensadvice.org.uk) provide free advice for people struggling with their loan payments. If you haven’t managed to persuade your lender to reduce your payments, or to give you a break, organisations such as the CCCS can talk to your lender on your behalf. They can also help you put a more manageable payment plan together for all your loans – to help you get back on a stable financial footing.