Consuming Issues: Keeping a roof over your head in recession

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The Independent Online

In the last recession – well, the penultimate one in the early 1990s – people lost their homes in startling numbers. Many handed keys to their lender in a desperate withdrawal from the property-owning democracy envisaged by Margaret Thatcher.

The backdrop was similar to the 2008/2009 recession – the one we have just exited, according to the economic figures. Prior to both slumps the economy had been overheating with a dramatic and unsustainable rise in house prices.

Now we are technically, if temporarily, out of the clutches of negative growth, it's worth finding out what happened to people's most valuable asset: their home. This time how many lost their home and had to move into rented property, relatives' homes or a cardboard box?

Borrowers seem to have fared better than they did in the 1990s. Repossessions totalled 67,300 for the first five quarters of the latest recession, according to the Council of Mortgage Lenders. Full-year figures for 2009 are published on 9 February, but if the last quarter stayed on trend at 11,000, the number of homes repossessed in this last six-quarter recession would have been 77,300.

By contrast in the five-quarter recession in 1990 and 1991 – the CML published only half-yearly figures then – the number of repossessions was about 83,350. So in this recession fewer people lost their home than in the shorter recession of the early 1990s. What happened in this last slump which was so different to the early 1990s?

Firstly, mortgage rates were much lower this time. Last year the base rate was 0.5 per cent and mortgages about 4 per cent. In 1991, the base rate was about 12 per cent with mortgage rates about 13 per cent. This may have been the single most important factor in keeping a roof over people's heads.

Lenders and ministers deserve some credit for acting responsibly. Banks were more understanding this time, not least because they probably realised that dumping large numbers of repossessed properties on a struggling market, as happened in the 1990s, creates a downward spiral. Lenders were also warned to behave sensitively by the Government, which also ploughed millions into helping mortgage holders. So far support schemes which lower payments for two years have helped more than 200,000 borrowers and another 88,000 are expected to benefit in the next two years. Through the separate Mortgage Rescue Scheme, £285m funded the conversion of mortgages into shared equity and rental agreements. Councils received £20m to help homeowners with interest-free loans and other measures and ministers funded free legal advice at courts.

Even on the day of a hearing, 80 per cent of repossessions can still be stopped if households attend court and access free advice.

For some homeowners, giving up their home is, sadly, a necessary first step to rebuilding their finances and the free Consumer Credit Counselling Service recommended this to 9 per cent of its 512 mortgage clients last year. But thousands more still have the keys to their own front door, because of lower interest rates and better policies by lenders and ministers. Sometimes, we do learn the mistakes of the past.

Heroes & Villians

Hero: Boots

Yes, it can be overpriced and they do like to push vitamins and other pseudo-pharmaceutical products of unproven and controversial efficacy, such as homeopathic remedies, but, gosh, the nation's favourite chemist seems to have mastered the discipline of customer service. Helpful, informed, polite. Perhaps it's only confined to the High Street Kensington branch in central London, but I hope not. Shoppers really notice the difference when they're treated well, so step forward, checkout assistant Samira and colleagues, and take a bow.

Villain: Morrisons

The cut-price grocer does some good things, not least sourcing a high proportion of its meat and vegetables in Britain. But it's hard to get away from its poor ethical performance on a range of issues. The starkest example is its failure to source any sustainable palm oil. For more than a year Morrisons has been "talking" about getting a green supply of the cheap vegetable oil poured into biscuits, bread etc. Unlike Tesco, Asda and Sainsbury's it has not set a date for buying supplies certified by the Roundtable on Sustainable Palm Oil. Most shoppers probably don't care.

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