Repossessions up 51% - but borrowers are fighting back

Measures to curb unnecessary repossessions appear to be having a good effect. Although repossessions are rising, the number of repossession claims being submitted to court are down. Also down are the number of possession orders granted. Here are the figures.

Mortgage repossession court claims and orders granted

Figures taken from Ministry of Justice and are seasonally adjusted. Figures are rounded to nearest 100, which explains small differences in the calculations.

These figures are for all possessions in just England and Wales, but it still indicates that many lenders are being a lot less aggressive, with court claims down almost 40% and orders granted matching that.

Repossessions may be up, but that's only natural during a recession. The good news is that the massive reduction in claims is a strong indicator that repossessions are happening more often as a last resort. Put another way, if the borrower shouldn't have received a possession order, then it's less likely he or she actually did.

How has this happened?

The cause is likely to be changes to the guidelines that lenders must follow before making a claim. There's no need for me to get into the technical details, but the Government made the changes in order to reduce unnecessary claims and ensure that lenders try all other solutions first. I've looked at several more quarterly reports from the Ministry of Justice, and the timing and extent of these reductions matches exactly with the date the new guidelines were introduced. (19 November 2008).

There are other measures that have been introduced, such as Support for Mortgage Interest and a Mortgage Rescue Scheme, but I doubt these will have a massive impact on repossession figures, as they're very limited. A new scheme that started in April, the Mortgage Support Scheme, may have more of an impact as it could potentially help more people. We'll see how the banks choose to handle the scheme when the next repossession data comes out in three months.

Repossessions up more than 50%. But how much more?

Repossessions might on average be more reasonable now, but that doesn't mean everyone's happy. As I said: repossessions are still up.

The Council of Mortgage Lenders (CML) publishes numbers on repossessions. Unlike the data above from the Ministry of Justice, the CML's figures cover the whole UK. (Well, 98% of the market anyway.) On the downside, it covers just first-charge lenders. Second-charge lenders - which grant you an extra home-loan on top of your existing mortgage - are not included.

From January to March this year, such repossessions totalled 12,800. In the same time last year it was 8,500, meaning first-charge repossessions are up 51%.

It's a shame second-charge lending isn't included in the figures. Citizens Advice and Shelter believe second-charge lenders are being less responsible on average than first-charge lenders and that would certainly make sense. They can get away with more aggressive behaviour because there is simply no solid data available on them, which could anger the public. What's more, they have likely been hit harder by arrears as more of them will have borrowers who were stretched even before the recession occurred.

As a result, it's likely that the real number of repossessions is not only a fair bit higher than 12,800, but also rising faster than 51% per year.

Buy-to-let repossessions doubled

Let's move on to landlords' properties being repossessed. Of the 12,800 repossessions last quarter reported by the CML, 1,700 of them are buy-to-let. The same time last year it was just 900, so more landlords are running out of cash, and the banks out of goodwill towards them.

There's nothing startling about that increase. However, this is just a tiny proportion of the entire buy-to-let market, less than half a percent, so it's probably not as difficult for landlords right now as most people think.

Some tenants face the fear of eviction within just a few weeks of repossession, say a few charities. However, groups representing lenders claim that the tenant usually gets to continue to stay provided they keep paying the rent. I think this is probably true, as it would suit all parties concerned.

Possession orders on tenants

Tenants who miss rent payments face a harsher time from their landlords than property-owners do from their banks when they miss mortgage payments. Here are figures showing the rate at which landlords are getting rid of tenants that they consider nuisances:

As you can see, these numbers are a lot higher than my first table. There's been no pressure for landlords to find alternatives to kicking out tenants, hence the negligible change over the past year. Bear in mind though that possession orders are not just used by landlords on tenants who fall into arrears. They're also used to remove squatters, for example.

What should you do?

It's very simple. If you're having any trouble with cashflow or paying your bills, no matter how serious, it is always worth getting free debt advice from quality, impartial sources that have huge experience improving people's finances. They could even help save you from repossession.

My favourite two such debt resources for Britain are The Motley Fool's Dealing with Debt board and National Debtline. Debt help for Northern Ireland is more limited. If you know of a good not-for-profit organisation that helps there, please post a recommendation below.

> Read 125 tips for dealing with debt.

> Read Buy-to-let investors are getting what they deserve.