Simon Read: Lenders repossess less but more are at risk

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The number of people struggling to pay their mortgage has surged by 78 per cent in the past year, according to figures issued by Shelter this week. The charity said that 18 per cent of homeowners are now experiencing problems, compared to one in ten a year ago – the equivalent of three million mortgage holders across the country, or one in six.

"Thousands of people are hanging on to their homes by the skin of their teeth," warned Shelter's chief executive, Campbell Robb. The prospects for anyone close to the financial edge are not good, despite some pleasing-looking repossession figures issued by the Council of Mortgage Lenders on Thursday.

The number of people who had their homes repossessed actually fell in the three months to September to 8,900. It was the fourth quarterly fall in a row and a good deal less than the 12,200 who lost their homes over the three months of summer 2009. But the record low interest rates have undoubtedly staved off disaster for the many families already stretching their budgets to near breaking point.

They've been helped by the currently different attitudes of lenders. The CML points to their "responsible approach", but it's clearly built out of self-interest. Banks, in particular, have been busy trying to avoid being put back on the naughty step by a government and public fed up with their profits-before-people approach. But lenders are also aware that snatching people's homes now when prices are so depressed compared to where they stood a few years ago is not a good idea, especially if people are in negative equity.

Repossessed properties tend to be sold at auction at, often, a substantial discount to similar properties in the same area because of their origins. It means lenders can take a sizeable bath on the deal. Because the property market is likely to remain fairly static for the next two or three years that could even make lenders less keen to repossess, which is something, I guess.

But, ultimately, lenders are often left with no choice. If people stop repaying their mortgage banks have to act to get their cash back and, sadly, that mostly means resorting to repossession.

The number of mortgages in arrears – a sign that homes are close to repossession – has actually fallen in the last few months to 176,100. But that trend could soon be reversed. With petrol, energy and food prices all going up – and January's VAT increase set to impact too – families are at as much risk as ever. For that reason, we should pay more attention to Shelter's figures this week than the CML's.

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