Mortgage Repossessions Set to Soar - Guardian

From Guardian Unlimited 29th October 2007

The number of repossessed homes looks set to soar next year to levels not seen since the 1990s house price crash, it was claimed today.

At the same time, house prices will edge ahead by just 1% in 2008 and property sales will fall by 15%, according to the Council of Mortgage Lenders (CML).

The group expects the number of repossessions to rise by 50% during the year, rising from 30,000 this year to 45,000 in 2008.It said this would be the highest level of repossessions seen since the 1990s, although it added the number of mortgages had increased by 1.5m since then, and the level of repossessions still represented just 0.38% of all home loans.

The number of people who are in arrears of at least three months is also set to increase, with 170,000 people expected to have problems keeping up with their mortgage repayments next year, compared with an estimated 145,000 this year.

The CML said this was because the five interest rate rises since summer 2006 were beginning to take their toll. This would be especially true for the 1.4 million people whose fixed rate deals, taken out when interest rates were much lower, run out next year.

But it added that additional pressure would be put on households as a result of a tightening in lending criteria sparked by the global credit crunch. It said remortgaging options available to some borrowers, such as those borrowing high income multiples, people with high loan-to-value ratios and those with adverse credit histories, would also reduce.

Crunch to intensify

The group said the credit crunch would exacerbate trends already emerging in the market. It predicts house price growth will fall from 7% this year to just 1% next year, while property sales will drop from 1.17m to just over 1m. At the same time, total mortgage advances will edge lower to £340bn, compared with £360bn this year, although the amount lent will remain above 2005 levels.

Net lending, which strips out redemptions and repayments, will also decrease, seeing a drop to £90bn from £105bn. But the CML added that it did expect interest rates to fall, and has pencilled in a 0.25% cut before the end of this year, with rates reducing by a further 0.5% to 5% by the end of next year.

CML director general, Michael Coogan, said: "The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago.

"Luckily, the credit crunch occurred at a time when the UK economy was robust, but even so the effects on the financial sector are significant, and the mortgage market is not immune from them.

"We now expect a slower mortgage market next year, although by no means a stagnant one," he added.

The group said the impact of the credit crunch made forecasting an even more uncertain process than usual, and as a result it was only issuing forecasts until the end of 2008, and would not issue its predictions for 2009 until the first quarter of next year.

Responsible Lending: Proposals for Action

Debt Campaigners Declare October 23rd ‘Responsible Lending Day’ and call on Government to raise its game to tackle UK Debt Crisis.

Debt on our Doorstep, the campaign for fair and responsible financial services, has declared October 23rd to be the UK’s ‘Responsible Lending Day’ and called on Government to raise its game to tackle irresponsible lending and Britain’s growing debt problem.

The day will see the Westminster launch of Debt on our Doorstep’s 17 page report into debt in the UK which sets out proposals for action in 8 areas including calls for:

Banks to disclose how they serve low income communities and meet the need for affordable credit

Regulation of the credit card industry to be tightened to ensure they take proper account of a borrower’s ability to repay and for a ban on unsolicited increases in credit limits and credit card cheques

Longer term funding for projects to tackle illegal money lending and for the introduction of a criminal offence of usury.

Lenders to also advertise APRs of agreements with payment protection insurance included so that borrowers can see the true cost involved

Calling on Government to draw up a properly resourced national strategy for debt advice provision

Launching the report, Damon Gibbons, Chair of Debt on our Doorstep, commented:

“The Government has so far underplayed the role of irresponsible lending in causing debt, and continues to allow the industry to target high cost credit at people on low incomes as a means of increasing profit.

We are now seeking some fundamental changes to the UK’s credit society – asking banks and mainstream lenders to prove that they are engaging with low income communities and can offer them the products they need. If the Government is willing to pump money into the financial services sector to offset the impact of the ‘credit crunch’ then it must start to seek better services for people in return.”

The launch takes place at 5pm in Committee Room 5 of the main building of the Houses of Parliament with the following speakers:

Prof Iain Ramsay, University of Kent Law School (Chair)
Damon Gibbons, Debt on our Doorstep
Mark Lazarowicz MP (Lab) & Chair, All Party Parliamentary Group on Debt
Ed Vaizey MP (Conservative)
Adam Price MP (Plaid Cymru)
Danny Alexander MP (Lib Dem)
Anne Pettifor, Advocacy International and author of 'The Coming First World Debt Crisis'

The first Responsible Lending Day also features a British Bankers Association conference in London on these issues, but which is taking place at a cost of £400 per head and has minimal involvement from consumer groups.

A full copy of the proposals for action are available from: http://www.debt-on-our-doorstep.com/files/responsible%20credit%20proposals%20for%20action.pdf