David Prosser: Making repossessions the last resort

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The Independent Online

Outlook That there has been another fall in the number of people having their homes repossessed is welcome. One of the few good things to be said about the economic misery of the past couple of years is that repossessions have been far lower than expected.

The reasons are relatively well-documented. The banks, the new bogeymen of our society, have come under pressure to avoid repossessions, except as a last resort. More significantly, interest rates have been at historically low levels. Mortgage repayments have never been more affordable.

Still, let us not be complacent. Higher unemployment, which now looks inevitable even if you do not buy the idea of a full-on double dip, is bound to lead to more people failing to stay on top of their repayments. And even for those who remain in work, rises in the cost of living next year will contrast sharply with the declines in disposable income that higher taxes and muted wage inflation will produce.

More happily, there is little prospect of an interest rate rise – certainly not in the first six months of the year. Back in the spring, it was thought the Bank of England would have raised the cost of borrowing by now. Today the debate is more focused upon when the Bank might think about another easing of monetary policy.

It's a shame though that one consequence of lower interest rates was the decision in October to almost halve the support given to borrowers on benefit through the "support for mortgage interest" scheme. The cutback saved just a few pennies, yet for a small but significant number of borrowers it has meant a move into arrears and towards repossession. Having pressed lenders to be supportive, it seems a pity the state has been less helpful.