Rise in repossessions set to worsen housing crisis

The grim state of the housing market will be underlined tomorrow by figures expected to show a small increase in the number of families losing their home for the first time in four years.

Even though we have got used to having a housing crisis rather than a housing market, evidence of a new tide of repossessions will probably push the Government into action. It did in 1991, when the then Chancellor Norman Lamont introduced the stamp duty holiday and arm-twisted building societies into launching mortgage rescue schemes.

Following tomorrow's statistics from the Council of Mortgage Lenders, forecasts to be published later this week by the stockbroker UBS predict the number of repossessions will climb from 49,210 last year to 55,000 this year and 65,000 in 1996. The analyst Robert Thomas says: ''With this week's figures we will find out whether we have learnt to live with this problem or whether another increase will force the Government into action.''

John Wriglesworth, director of strategy at Bradford & Bingley Building Society, argues that with the number of repossessions likely to stay high until the end of the century, ''the Government must do something to restore faith in the housing market.''

The mortgage lenders have been lobbying hard for a government retreat from its plans to cut back income support for mortgage payments, due to come into effect in October. The industry saw the Government's switch to direct payment of income support to lenders in 1992 as a quid pro quo for their agreement to rein back the number of repossessions. They believe the Government is breaking its side of the bargain.

Adrian Coles, director general of the Council of Mortgage Lenders, warns that the income support cuts will be a direct threat to the downward trend in mortgage arrears and repossessions. He said lenders were continuing to help troubled borrowers, ''yet the Government does not appear to be showing an equal long-term commitment to bringing down mortgage arears.''

Julian Birch, of the housing charity Shelter, agrees that the lenders will increase the pace of repossessions if there is no government retreat. ''The main need is stability at the bottom end of the market,'' he says. ''The changes to income support will have exactly the opposite effect.''

A pick-up in repossessions in a moribund market could have wider repercussions. If most mortgage lenders decided to get tougher with households in arrears later this year, a new wave of sales mainly at the bottom end of the market might well push house prices lower.

However, lenders hold out little hope of any more than a cosmetic adjustment to the income support restrictions. They fear instead a quick-fix gimmick in the Budget.

A number of big lenders favour one proposal, floated by the Prime Minister's policy unit, to phase out tax relief on mortgage interest payments and replace it with a one-off grant for moving. Others would be horrified by further erosion of the tax relief, which Mr Major has anyway publicly ruled out.

A second measure that would also win favour would be the abolition of stamp duty. What the industry, backed by the entire economics profession, does not want is a temporary stimulus.

Michael Hughes, director of research at BZW, says: ''The problems affecting the housing market are structural. There would be dangers in any measures which might bring results before the General Election.''

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links