Property repossessions at an all time low

Property repossessions are at their lowest level since 1981, with nearly 700 fewer properties repossessed than in 2017.

Just 6,950 homes were repossessed during 2018, the equivalent of just 0.06% of all homes with an outstanding mortgage.  That’s 134 homes repossessed each week, compared to nearly 50,000 repossessions at the height of the financial crisis in 2009 (962 homes a week), and 75,500 in 1991 (1,452 homes a week), the peak since records began.

Repossessions have fallen each year since 2009. The Mortgage Market Review came into force in 2014 as a result of the government’s desire to curb irresponsible lending:

Mortgage Market Review

Some of the main changes of this reform to mortgage lending are:

1. Customers need to satisfy lenders that they can afford the mortgage – they must provide evidence of income in all cases;
2. Customers can borrow an interest-only mortgage as long as there is a credible repayment strategy;
3. Most interactive sales (for example face to face and telephone) must be advised unless the customer is a mortgage professional, a high net worth mortgage customer or a business borrower; and
4. Non-advised sales are not allowed, but execution-only sales are allowed in certain circumstances;

This means that 95% of new mortgage deals are now on a fixed rate, providing homeowners with more certainty over monthly expenditure.  In addition, low and stable interest rates are also a key factor. Currently, mortgage interest as a percentage of income is 7.1%. In 2009 it was 11.1%, while in 1991, the figure was a staggering 21.4%.  Unlike in the 1990s, repossession is now a lender’s last resort. Struggling borrowers can request a payment holiday, ask for a mortgage term to be extended or arrears to be added to the loan.

Lisa Mclean, Oasis Mortgage and Protection Advisor, says “Many of the potential buyers I speak with are worried about the turbulence of Brexit and how the property market is going to react, but I assure them that homeownership is remarkably secure in today’s market and this is down to a number of factors:

• There has been a sustained period of low interest rates which has made repaying a mortgage easier to budget for and much more affordable.  For instance, a first-time buyer purchasing a one-bedroom apartment in Staines-upon-Thames would pay around £270,000.  With a 10% deposit and a fixed rate mortgage at 1.96%, they would be paying around the same monthly amount as a one-bedroom rental property; approx £1,000pcm but with the security of being a property owner, not a tenant.
• Mortgage lenders now have a duty of care to assure that borrowers can afford to repay their mortgages and will put realistic payment plans in place if circumstances change and people are in difficulty.  Repossessing a property really is the last resort these days.”

The other beauty of low-interest rates and the stability of the mortgage market is that more mortgage products with smaller deposit requirements are being introduced back into the mix. Affordability tests are clearly working so there is no reason why loans of 95% or above should present any danger and this will be very welcome news to those who are desperate to get onto the property ladder but are struggling to save for a deposit.  It is one of the biggest financial hurdles that first-time buyers face, and for some is insurmountable, so more widespread LTV mortgages would help to remove this barrier and give the younger generation a more optimistic chance of home ownership.”

If you are thinking of getting a mortgage or would like advice on your current options, get in touch with Lisa today:

If you find yourself in a situation where your debts are mounting and you are worried about making your repayments, please CLICK THIS LINK or seek advice from your local Citizen’s Advice Bureau.