David Prosser's Outlook: Help now for hard-up homeowners facing a bruising battle with the bailiffs
Saturday 16 August 2008
What's to be done about the worrying trend of increasing home repossessions? Mortgage lenders were quick yesterday to point out that a 24 per cent rise in repossession orders does not necessarily mean all those people will leave their homes – a good proportion will resolve their cases before it comes to that. But thereis mounting evidence that repossession is becoming a really big problem once again.
Indeed, the Financial Services Authority has already said 9,152 homes were repossessed in the first three months of the year, a rise of 40 per cent on the same period in 2007. It also reported that the number of mortgages three months or more in arrears rose by 15 per cent, to 302,000 – 2.5 per cent of Britain's total mortgage loan book.
Challenged with the latest numbers yesterday, Caroline Flint, the hapless Housing minister who earlier this year embarrassed the Government by allowing her cabinet briefing notes on plunging house prices to be photographed, sounded like a scratched record. Since repossessions and repossession orders began ticking upwards last year, Ms Flint and her fellow ministers have repeatedly insisted that borrowers were not facing the level of crisis seen in the early Nineties. She also takes every opportunity to say she will ensure that lenders take a compassionate view of people struggling to stay on top of mortgage repayments.
Well, maybe there will be fewer repossessions in this property slump than during the desperate days of the Nineties. Thank goodness for that. But the comparison isn't going to be much consolation if you're one of the poor souls opening the door to the bailiffs.
And as for compassion, the Government's message to mortgage lenders might go down a little better if it showed some willingness to do its part. This, after all, is a Government that has enjoyed a huge increase in tax receipts from the housing boom, thanks to a massive rise in the stamp duty tax take. Now it's time to give a little back. At the very least, this is the moment to reintroduce income support for mortgage interest payments for homeowners who lose their jobs. And a reform of stamp duty, while we're at it, is in any case long overdue. Not that it would help people now struggling to pay their mortgages, but the cost of the tax is another strain on new buyers, the defaulters of the future.
Another option for Ms Flint – and one she might feel more comfortable with – is to instruct the FSA to take a much tougher approach with those lenders identified as being harder on struggling borrowers. The FSA has already identified specialist lenders, particularly in the sub-prime market, as being more likely to threaten repossession early in the arrears process. It needs a mandate to tackle that aggression.
Not that mainstream lenders are guilt-free either, no matter what the Council of Mortgage Lenders would like us to think. While the CML has urged the FSA not to tar the industry with the brush applied to the specialists, Shelter, the housing charity, says it has evidence of lenders turning to the repossession process at the first sign of trouble with borrowers. I know who I find more credible.
The reality of mortgage lending is that there will always be a small minority of borrowers who find their repayments impossible and end up losing their homes. But the challenge for government and the mortgage industry is to protect homeowners from extraneous shocks – a sharp increase in mortgage costs, say, or a recession – for which they could not have reasonably been expected to plan.
The current economic slowdown, which looks increasingly likely to get worse before it gets better, is exactly that sort of shock. So to a lesser extent is the big increase in the cost of mortgage repayments experienced by people who took out cheap deals two or three years ago and are now being moved on to much higher rates of interest.
Unfortunately, however, there is no evidence that either government or mortgage lenders recognise these shocks for what they are. Until both take action, the numbers of repossessions and repossession orders will keep rising.
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