Your Home Is At Risk...

With fifty properties being seized every day, what can you do to avoid losing the roof over your head?

If you've ever bought a home, then you've probably seen this wealth warning before:

"Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it."

To most of us, this is just a legal warning to remind us that we don't own our home outright until we've paid off any loans secured on it. Until your mortgage has been cleared, your mortgage lender has a financial interest in your property. Thus, it can repossess (seize) it if you fail to keep up the repayments on a home loan, second mortgage or secured loan.

Of course, having your home repossessed is very much a last resort, and neither borrowers nor lenders want to go down this route. However, if you fall seriously into arrears on your mortgage, say, six to twelve months behind, then you can expect your mortgage lender to begin legal proceedings to recover its loan. At worst, this means seizing your home and putting it up for sale or auction, often at a knockdown price to ensure a quick sale.

Naturally, many people who find themselves in a tight spot take the plunge themselves by putting their house up for sale before their mortgage lender intervenes. Although this is a painful decision to make, at least it leaves the homeowner in control of the sale process, enabling them to avoid a 'fire sale' at a later date.

Nevertheless, according to the latest figures from the Council of Mortgage Lenders (CML), repossessions rocketed in 2006. In the first half of 2006, there were 8,140 mortgage repossessions, followed by 8,860 in the second half, making the annual total a suspiciously round 17,000. Let's compare last year's figure with those from 1991 onwards:

As you can see, repossessions have fallen dramatically over the past fifteen years, bottoming out at just over 6,000 in 2004. However, since then, they have risen steeply, up by more than seven-tenths (71%) between 2004 and 2005, and by close to two-thirds (65%) between 2005 and 2006.

Hence, although we've seen large percentage increases in mortgage repossessions over the past two years, the number of seizures is relatively low in historical terms. Given that there are around 11.6 million mortgages in the UK, only around one homeowner in 680 lost a home in 2006, which is a reassuringly low proportion.

Nevertheless, having been to court to see people lose their homes in the 'repo boom' of the early Nineties, I understand that there is often real tragedy and misery behind each of these seizures. I think of it this way: with an average of 2½ people per household, roughly 42,500 individuals were turfed out of their homes in the past twelve months, which is a crying shame.

Alas, the CML is forecasting even higher repossession figures for 2007 (19,000) and 2008 (20,000). However, I suspect that these projections are too low, because the CML doesn't have a good track record when it comes to forecasting the future, as I revealed in this article. Hence, we should take its predictions with a pinch of salt!

Finally, there's no doubt that many homeowners are feeling the pinch thanks to rising taxes, higher household bills, record levels of personal debt, and recent interest-rate rises. What's more, the second-biggest cause of mortgage arrears and repossessions is, purely and simply, financial mismanagement. (The biggest cause is a reduced income.) Hence, I expect more and more Brits to allow their finances to spiral out of control, simply because bad financial habits have driven out the good.

If you want to hang on to the roof over your head, no matter what befalls you, then check out these articles:

• How You Could Lose Your Home
• When Mortgages Turn Mean
• Your Home Could Become A Prison
• Lessons From The Last Housing Crash
• How To Dodge The Financial Hurricane

Here's wishing you a lifetime of worry-free home-owning!

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