New data published by the Council of Mortgage Lenders (CML) indicates that the number of home repossessions has fallen by 1%, from 9,100 in the first quarter of the year to 9,000 in the second quarter. However, some people in the industry have warned of an “arrears timebomb”, with disaster set to strike when rates rise in 2012.
Compared with the second quarter of 2010, the latest repossession figure represents a 7% fall. At this stage in 2010, there had been 19,500 repossessions, compared with 18,100 so far this year. The number of mortgages in arrears of 1.5% to 2.5% has increased, however.
Paul Smee, director general at CML, said that the stabilisation of mortgage repayment problems could be attributed to “stable employment and low interest rates.” He added that he felt there was no need to revise current forecasts in light of the current uncertainty in the global financial markets.
The Citizens Advice Bureau has reported that it has dealt with over 100,000 cases where people are in mortgage or secured loan arrears, and says that it has prevented 5,000 people from losing their homes in the past year. Gillian Guy, chief executive at the CAB, said: “With the cost of living going up daily and incomes lagging badly behind, mortgage lenders and the government must focus on helping people stay in their homes. Repossession is a terrifying prospect and should always be the last resort.”
If you do fall behind with your mortgage payments, you should always treat them as the top priority before paying back any other debts. Otherwise, you risk losing your home. Always contact your lender if you are expecting to miss a payment, rather than waiting for them to start threatening you with legal action. They may be willing to reduce your monthly payments in some circumstances.
Additionally, you should ensure you are receiving any benefits or tax credits to which you are entitled. The Government also operates a Mortgage Rescue scheme, through which you be able to sell your home but continue living there and paying rent. You can get more information on this from your local council.
If you are struggling to repay unsecured loans, credit cards or overdrafts, we can provide confidential debt advice.
Moneyfacts have released new data showing that interest rates on new mortgages are currently at their lowest level for 23 years. This has been put down to the greater ease with which lenders can raise funds through the financial markets at a time when there is no imminent prospect of the Bank of England raising its base rate above 0.5%.
The average two-year fixed rate mortgage is now 4.32% interest, with three-year fixed deals averaging 4.92% and five-year fixed deals at 5.92%. The average interest rate for a two-year tracker is currently 3.37%.
The benefits of lower rates may be limited for many consumers, as low rates are often coupled with high arrangement fees, and the majority of deals still require borrowers to pay a minimum 20% deposit.
Michelle Slade at Moneyfacts said “Lenders appear to be applying cuts equally across all loan-to-value (LTV) tiers, which is good news for first-time buyers, as previously cuts were only being applied to the lower LTV bands.”
Until recently, experts were predicting that the base rate would increase as soon as September, but the poor performance of the economy, and the decision by a new member of the Bank of England’s rate-setting committee to vote against changing the rate, means rates are unlikely to rise until well into 2012.
Inevitably, interest rates will rise at some stage. Anyone opting for a variable rate mortgage therefore needs to think carefully about whether they will be able to afford this when the monthly repayments increase.
Indeed, Richard Banks (chief executive of UK Asset Resolution) has warned that Britain will face a ‘tsunami’ of house repossessions when interest rates do eventually go up. UKAR is responsible for running the nationalised mortgages of Bradford & Bingley and parts of Northern Rock.
An Individual Voluntary Arrangement (IVA) is a government-endorsed solution for people whose monthly debt repayments and living costs exceed their income, allowing them to pay a manageable amount. IVAs are normally chosen by people who are unable to cope with unsecured debts they have taken out, such as personal loans or credit cards.
If you have a mortgage or other secured borrowing such as a debt consolidation loan, the provider has lent you the money on the basis that the value in your property gives them a means of recouping their losses if you stop making repayments. Because mortgages tend to be large sums, providers need a means of offsetting the risk they are taking by lending you the money. Similarly, debt consolidation loans tend to be utilised by those with a poor credit history, so lenders secure the debt to minimise the risk they are exposed to. Therefore, these providers have a legal guarantee which ensures that, in the event you fail to make the agreed payments, they can force you to sell your house in order to repay the loan.
For this reason, it is highly unlikely that these companies would be willing to agree to take reduced payments within the terms of an IVA. Simply put, IVAs are not designed for situations where borrowers are struggling to repay large secured debts.
That doesn’t mean you can’t set up an IVA if you have a mortgage or another secured loan. If you also have various other unsecured debts that you’re having difficulties repaying, we may be able to arrange an IVA that addresses those debts. If you don’t want to lose your home, however, you need to ensure you keep up the monthly repayments on any secured borrowing.
Anyone who has had the misfortune of dealing with bailiffs as a result of Council Tax arrears will no doubt understand what a distressing ordeal it can be. Many of us at some point or another have been left in the red and have been unable to keep up with council tax payments for one reason or another. It is extremely important to keep up with Council Tax payments but in some cases, non-payment is simply unavoidable.
Before you know it, debts soon mount up and bailiffs are brought in to collect the debt. However, many people are unaware of their legal rights when it comes to dealing with bailiffs. There are many complex laws surrounding bailiffs but there are a few main points that should always be remembered.
1 – You don’t have to let bailiffs into your home. As long as you haven’t allowed entry in the past to collect for the current debt, you don’t have to allow entry to the bailiff, regardless of what they tell you. Nor can they forcibly enter your home. Keep windows and doors locked otherwise they can enter through them legally. Contrary to popular belief, bailiffs cannot get the police, locksmiths or nay other means to help them break in. If police do attend, they are there purely to keep the peace.
2 – If you do allow entry to the bailiff, there are only certain goods that they can take. It is not permitted for them to remove items that are rented or items that belong to someone else. They cannot remove goods that are essential for your employment, business or vocation (although this is quite vague and most bailiffs will have a different idea of what this entails). If you think that goods have been wrongfully taken, you should lodge a formal complaint against your bailiff.
3 – Every bailiff should have certain documentations such as photographic ID and written authorisation from their visit from the council. If they fail to produce either of these, do not allow entry under any circumstances.
4 – To avoid removal of goods, you should contact your bailiff and arrange monthly repayments to cover the amount of the debt. You should make sure that the repayments are a realistic and affordable amount. Failure to keep up with repayments could worsen the situation.
5 – Contact your local council with a proposal for monthly repayments. In some circumstances, councils will take the account back from the bailiff and you can repay them directly.
6 – bailiffs will charge for visits to your home and the amount will be added to your outstanding debt. Try to avoid this by resolving the situation as quickly as possible. By law, creditors must give 14 days warning before a bailiff is assigned to an account. In this time, contact the council and arrange repayments to avoid extra charges. For council tax arrears, bailiffs can charge a maximum of £42.50. If the amount exceeds this, you must dispute it.
There are ways of resolving debt situations other than bowing down to the bullyboy tactics of bailiffs. There are plenty of free resources available to find out more about how to deal with bailiffs.
At the end of April 2011, personal debt in the UK amounted to £1,452 billion – the current sum total of personal debt is almost equal to the country’s entire GDP for 2010.
The average household debt stands at £55,854 (or £8,121 if mortgages are excluded) – a property is repossessed every 14 minutes in the UK and landlord possession orders are made 265 times a day. £179 million is paid in interest every 24 hours, and an individual is declared bankrupt or insolvent every 4.36 minutes.
The total amount of lending in April 2011 increased by £1.2 billion (there was a £700 million increase in secured lending and a £500 million increase in consumer credit lending). At the end of April, total secured lending had reached £1,241 billion and total consumer credit stood at £211 billion.
In the past year, £9.5 billion of loans were written off by UK banks and building societies, which is equivalent to £20.71 million every day, and the Citizens Advice Bureau deals with nearly 10,000 people struggling with debt problems daily.
Redundancy is fuelling increasing levels of debt, with 1,384 people made redundant every day and 850,000 unemployed for 12 months or more.
The rate at which repossession cases are being brought to courts across the country is soaring, it has been claimed.
According to members of the Transact network, courts in various regions of the UK have seen a dramatic increase in the number of repossession hearings since the start of this year as more and more families struggle to deal with their money problems.
Nazma Latif, coordinator of the Sheffield Law Centre’s Duty Scheme, has indicated that there was a 100 per cent rise in repossession cases brought to court during the first three months of this year.
"The court used to hold a session devoted to possession hearings once every three weeks, now they hold one every week," she explained.
"Where we would help two or three clients every session, we now help five or six."
The Council of Mortgage Lenders recently insisted that its members view repossession as a last resort and that borrowers with debt problems should contact their lender as soon as they can.
Repossession is only carried out as a last resort when borrowers are left with no other debt management option, the Council of Mortgage Lenders (CML) has claimed.
In a letter to the chancellor Alistair Darling recently, the CML said that the scale of repossessions in the UK is low and likely to remain so even as the economic outlook worsens.
The council suggested that its members do all they can to help families who are struggling to meet their repayment demands and made clear that borrowers can help themselves to avoid these kinds of money problems.
According to the CML, homeowners can help themselves keep hold of their property "by ensuring they make contact with their lender as soon as they realise they may face difficulties".
Homeowners and borrowers around the country can expect the Bank of England to cut the base rate of interest until August at the earliest, according to the recent assessment of Global Insight’s chief UK and European economist Howard Archer.
Millions of British homeowners are facing serious money problems as the economy slows and they are left unable to meet their mortgage repayment demands, according to recent research.
A study by the insurance firm Axa has suggested that there are more families vulnerable to having their home repossessed than was the case during the most recent housing crisis in the early 1990s.
Lending practices during the past 15 years have seen millions of Britons borrowing four or more times their own income levels and for many this will result in unmanageable debt problems if the country’s economic issues worsen.
Reflecting on the research, Axa’s director of protection marketing Iain Mallon said: "The economic growth experienced in the UK in the past 15 years has encouraged a short-term view of finances with a buy today and pay tomorrow attitude."
Last week, the mental health charity Mind insisted that lenders in the UK should take a more responsible approach when dealing with individuals who have serious debt management and money problems.
A study has been launched by the Office of Fair Trading (OFT) to establish how the sale and rent back industry is operating in the UK.
Sale and rent back enables homeowners with debt problems to sell their property and remain as a rent-paying occupant and the OFT is keen to find out if consumers are getting a fair deal under these circumstances.
The office has suggested that the study has become necessary because more and more families are facing money problems and mortgage debt woes as a result of the UK’s economic downturn.
"Sale and rent back schemes might be helpful for some consumers but there are a number of potential concerns including whether consumers in difficult circumstances are making well informed choices," said John Fingleton, the OFT’s chief executive.
Earlier this week, Citizens Advice urged money lenders to negotiate more readily with customers that are facing the prospect of repossession.
Families around the country are likely to be among those most at risk of having their home repossessed over the course of this year, according to one expert.
Paul Holmes, operations director of first-time buyer solutions firm Firstrung, is convinced that families with a new mortgage deal in place will be seriously stretched financially over the coming months.
Making a move from a three-bedroom to a four-bedroom property can result in a much heavier debt management burden that will be very difficult to carry in the current economic climate, Mr Holmes maintains.
"The real damage here in repossession territory unfortunately is in the family arena. That’s where the affordability is killing people," he said.
Recent first-time buyers by contrast should be able to deal with the downturn in the economy and the fall in property prices, according to Mr Holmes.
Figures from Credit Action have shown that the typical household debt management burden in the UK, including mortgage arrears, is worth in excess of £57,000.