Home repossessions could double this year (February 13, 2008)

Latest Property And Finance News

Home repossessions could double this year

John Stepek - Moneyweek, Repossessions are picking up. They jumped by 20% last year, compared to 2006. But here's the good news. There were still fewer repossessions than the Council of Mortgage Lenders (who reported the data) had expected, at 27,100 compared to a forecast of 30,000 for the whole of 2007...

And better news yet. That number, 27,000, is still far fewer than the 75,500 households who were kicked out of their homes at the height of the last recession, in 1991.

And if you think all this 'good news' sounds exactly like someone clutching desperately at straws, then you'd be absolutely right...

Repossessions actually came in lower than the Council for Mortgage Lenders had initially predicted, which had many estate agents trying to look on the bright side. But a 27,100 turnout against a forecast for 30,000 is a pretty good prediction by anyone's standards (and downright miraculous by those of economists'), so there's not much comfort to be gleaned from that.

Why repossessions could hit 60,000

In October, the CML said that this year repossessions could hit 45,000, but it's been reluctant to update that forecast. But mortgage broker John Charcol suggested to The Telegraph's Emma Thelwell that there could be as many as 60,000 repossessions. That's suddenly not very far off the fabled 75,000 or so we saw in the early 1990s, and more than double this year's.

The really worrying thing is that this particular batch of repossessions doesn't actually include the knock-on effects from the credit crunch. Yes, the figures include the last half of 2007. But bear in mind that a repossession takes time to go through. We're essentially looking at 27,000 repossessions for a time period when lending was still lax, and interest rates were pretty low.

We're now heading into a period where rates charged on mortgages are rising (there are still hundreds of thousands of people to come off fixed-rate mortgages, many of whom will struggle to find decent replacement deals if they are even remotely un-creditworthy). House prices are also falling, which will make it harder for people to remortgage as the amount of equity in their home drops.

Click here to return to the News page