Why home repossessions will rise 20%
Numbers of home repossessions are at an 18-month low, but experts predict this figure will soon start to rise.
Mortgage repossessions fell to 8,500, from 9,600 in the second quarter of the year, the lowest number since the final quarter of 2010.
Despite these figures it’s not all good news. The Council of Mortgage Lenders (CML) hasn’t changed its forecast for the whole of the year, which predicts a rise of 20% in repossessions from 2011.
This is because it says the dire economic state we’re experiencing will continue and lead to greater numbers of homeowners struggling to make their monthly repayments.
For the whole of 2012, the CML has predicted the number of repossessions to hit 45,000 and this hasn’t changed despite the latest results.
This is down to the poor forecasts for growth coming from the Bank of England, combined with the Government’s planned benefit changes, coming into force at the beginning of next year, which mean less people will be entitled to help if they can’t pay their mortgages.
The number of mortgages in arrears didn’t change much and there were 157,400 with arrears of 2.5% or more which is only slightly lower than the 157,800 at the end of the first quarter of the year.
Support for Mortgage Interest
One of the major reasons more houses haven’t been repossessed in the past few years is because of the help available from the Government in the form of Support for Mortgage Interest (SMI).
This benefit helps those who have trouble paying their mortgage and has ensured nearly 250,000 people have remained in their homes since 2008.
However, changes are coming into place next year which mean not as many people will be able to claim the benefit.
This benefit is paid directly to lenders and is available for mortgage borrowers who get income-related benefits such as Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, and Pension Credit.
It provides help only with mortgage interest, not capital repayments, and is paid at a standard rate (currently 3.63% a year).
SMI covers the interest payments on up to £200,000 of a loan and kicks in after an initial 13-week period. But from next year homeowners will have to wait a whopping 39-weeks before getting the benefit.
The CML has urged the Government to re-think this decision as it says economic and employment uncertainty combined with the effect on households of higher living costs and squeezed incomes means homeowners will continue to struggle to pay their mortgages for the foreseeable future.
What do you think? Is this the calm before the repossession storm? Should the Government ditch its planned revamp of the SMI scheme? Let us know your thoughts in the comment box below.