13 minutes to the next repossession

Lenders seize 110 properties every day. Here's how to keep the roof over your head!

In the first three months of this year, mortgage lenders repossessed (seized) more than 9,100 homes, according to the Council of Mortgage Lenders (CML).

Only 7,900 homes were taken back in the final quarter of 2010, so repossessions leapt 15% in the first three months of this year. However, this is in line with seasonal variations, with fewer people kicked out of their homes in the festive season. Indeed, home seizures between January and March 2011 were down a tenth (10%) on the same period of 2010.

40,000 to lose their homes

Alas, the CML predicts that 40,000 mortgage borrowers will lose their homes this year, thanks to difficulties with paying their home loans. In other words, mortgage lenders seize 110 homes each and every day. This which works out at 4.6 homes every hour of the year, or one repossession every 13 minutes.

Of course, it's a personal tragedy whenever homeowners lose the roof over their heads. However, we should put these figures into context. There are 11.3 million home loans in the UK, so only one in 283 mortgaged homes will be seized this year by banks, building societies and other lenders.

Thus, 99.65% of mortgage borrowers won't lose their homes in 2011, which is good news.

The previous crash was worse

What's more, repossession levels have been far higher in the past, chiefly during the housing crash of 1989 to 1995, as my table shows:

As you can see, 75,500 domestic properties were repossessed in 1991, which is 1 in 130 of all mortgaged homes. That's almost more than twice the level of homes expected to be seized in 2011 (one in 283).

What's more, during the last housing crash, far more homes were repossessed than in the latest downturn. Between 1991 and 1993, a total of 202,700 mortgaged homes were seized. Between 2008 and 2010, this total was almost 40% lower, at 124,200.

Why things are better today

How can repossessions be lower now than they were in the Nineties slump, even though we've suffered a credit crunch, bank collapses and a severe recession? There are three reasons:

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First, the Bank of England's base rate has been stuck at an all-time low of 0.5% a year since March 2009. This keeps mortgage rates low and, therefore, makes it easier for homeowners to meet their monthly payments.

Second, the government and other organisations have forced mortgage lenders to show more 'forbearance' (loan leniency). In other words, ministers and civil servants are putting pressure on lenders to keep people in their homes, even for loans seriously in arrears.

Third, taxpayers own 83% of Royal Bank of Scotland, 41% of Lloyds and 100% of Northern Rock and Bradford & Bingley. Hence, through the government, we have a bigger say in how these bailed-out banks behave.

Why it's going to get worse

Now for the bad news: although repossessions are at manageable levels, they're certain to increase. Homeowners face a toxic cocktail of rising taxes, high inflation (the rising cost of living) and lower disposable incomes, combined with high unemployment and government cutbacks.

Currently, only 166,900 mortgages are in arrears by 2.5% of the balance or more. However, when interest rates start to rise next year, this figure will rise rapidly. Therefore, the current level of repossessions is merely the tip of the iceberg, as a huge wave of mortgage arrears is poised to wash over the banking sector.

As a result, mortgage arrears are sure to rise and, in time, lead to even higher levels of home seizures.

What can you do to protect your home?

If you're worried about the roof over your head, then here are four groups to turn to:

1. Yourself

To stay in your home, you have to make paying your mortgage a priority. In the hierarchy of household bills, first come Council Tax, TV Licence and energy bills. After these come fines and taxes and then your mortgage.

In other words, you need to put your mortgage payments above all other lesser bills and debts, including credit cards, personal loans, water bills, and so on. Pay as much as you can towards your mortgage before negotiating an interest freeze and reduced payments with other creditors.

Recent question on this topic

• anthony2k11 asks:

  can my nan just give me her house

  • 
    SoftwareBear answered "it's the care home that is the most likely scenario ... the estate is below inheritance tax..."
  • 
    MikeGG1 answered "The Nil-rated Inheritance Tax band is £325,000 so no problem there. The Care Home problem is the..."
  • Read more answers

2. Your lender

The last thing your lender wants is to repossess your home. Thus, when your finances take a knock, you must keep your lender in the loop. Your lender will insist that you pay what you can, but may be willing to reduce your payments for a limited period, or charge you only interest for a while.

Likewise, depending on your circumstances, you can ask for a payment holiday or for your loan to be extended over a longer period, so as to bring down your payments.

Eventually, your lender will insist on any arrears being paid off, so you need to reach agreement on a repayment plan. Also, check to see if you have mortgage payment protection insurance (MPPI), as this could cover your payments for up to a year.

3. The government

When you're in difficulty, the state could step in to help.

If you're out of work or off sick, then you may be able to claim Support for Mortgage Interest (SMI). This state benefit helps meet the interest payments on your mortgage. SMI is paid at a standard interest rate of 3.63% on up to £200,000 of your home loan. However, SMI is means-tested, so only about three in ten applicants benefit from this safety-net.

Also, a state-sponsored Mortgage Rescue Scheme may give you financial help to stay in your home, via your local housing authority. However, eligibility criteria for this scheme are very tight: your household must include a pregnant woman, someone with dependent children, or a person who is vulnerable because of old age, physical or mental impairment.

In addition, your household income must be less than £60,000 a year and there are further restrictions on the size of your mortgage and the value of your home. Frankly, you should view this scheme as a desperate last resort.

4. The voluntary sector

Some of the best advice and support available to harassed homeowners is to be found in the voluntary sector. Several charities are eager to help mortgage borrowers in arrears, such as Shelter, Consumer Credit Counselling Service, Citizens Advice, and National Debtline.

Finally, if all else fails, you could try to sell your home and find somewhere else to live. This is nothing to be ashamed of, as over 9,000 people a year voluntarily hand back the keys to mortgage lenders!

More: Find your perfect mortgage | Why you might be one of Britain's secret tenants | Beware this property swindle