UK arrears Timebomb : warns mortgage experts.

geneer

http://www.guardian.co.uk/money/2011/aug/11/home-repossessions-fall-arrears-timebomb


Come in number 9, your time is up.

The number of homes being repossessed fell by 1% in the second quarter of the year to 9,000, compared with 9,100 in the first three months of 2011, according to the Council of Mortgage Lenders (CML). But some housing insiders claim the UK is set to experience an "arrears timebomb", which will go off as soon as rates rise next year.
The three-month figure represents a 7% fall on the number of home repossessions recorded in the second quarter of 2010 and takes the total number in the first half of 2011 to 18,100 compared with 19,500 in 2010.
But the number of mortgages in arrears of between 1.5% and 2.5% of the outstanding balance edged up from 77,800 to 78,500 in the second quarter of the year, and the CML did not revise its total repossession forecasts for 2011 and 2012, which stand at a respective 40,000 and 45,000.
CML director general Paul Smee said: "Mortgage repayment problems have stabilised against a backdrop of stable employment and low interest rates. Despite current uncertainty in financial markets, we see no need to revise our forecasts. Anyone with debt worries should take advice and speak to their lender at the earliest opportunity, as most temporary financial problems can be resolved.
"It is clear from the low rate of repossession that lenders want to keep people in their homes, and are successfully doing so in the vast majority of arrears cases. Repossession really is seen as a last resort."
Chris Gardner, director of mortgage broker Obligo, warned: "This year's apparently modest figures could be the tip of the iceberg. They're being kept artificially low by two important factors: the interest rate is at a historic low, and lenders have shown remarkable forbearance. Together they have created a fool's paradise, where people's mortgage payments are comparatively low and lenders are being especially tolerant of late payers.
"But lenders' forbearance cannot last forever and if they change their approach the rug will quickly be pulled from under many late payers, leading to thousands more repossessions.
"While this week's low growth forecast from the Bank of England is likely to mean an interest rate rise is still some time off, when – not if – the rate goes up there will be a big spike in arrears.
"The current low rate means that many who are just able to meet their repayments now will soon be swamped by even a small rate rise. Together they form an arrears timebomb, which will go off as soon as rates rise next year."
The CML has also announced that the value of new buy-to-let loans increased by 21% in the second quarter of 2011, driven mainly by remortgaging. It said there were 32,000 buy-to-let loans worth £3.5bn taken out from April to June, the highest number and value since the last quarter of 2008.
David Whittaker, managing director of Mortgages for Business, said: "Landlords are basking in the glow of the BTL [buy to let] sector at the moment. Product numbers are up, yields are healthy and rents are in no danger of falling. Amid a backdrop of uncertain markets and social unrest, the BTL market is one of the few beacons of light in an otherwise depressing picture. Landlords and professional property investors are voting with their feet that now is a good time to be in the market and we expect this to continue throughout the rest of the year."
However, the CML added that the BTL market is running at around one third of the levels seen at the peak of lending in 2007.
Citizens Advice has tips for homeowners struggling to keep up with mortgage payments, claiming it has dealt with more than 100,000 mortgage and secured loan arrears and stopped 5,000 people becoming homeless over the past 12 months.
Chief executive Gillian Guy said: "With the cost of living going up daily and incomes lagging badly behind, mortgage lenders and the government must focus on helping people stay in their homes. Repossession is a terrifying prospect and should always be the last resort."
Citizens Advice suggests that if you fall behind you should make mortgage payments a top priority – you could lose your home if you fall behind – and let your lender know if you are having problems rather than simply stop paying or miss payments. Get free, independent advice as soon as you realise there's a problem (don't wait until you're threatened with court action) and see if your lender will agree to reduce your monthly interest payments or make other adjustments.
You may also be entitled to benefits, tax credits and other help if you are struggling. Don't ignore court papers and court hearings and, if facing repossession, find out if you qualify for the government's mortgage rescue scheme, which may allow you to sell your house but continue to live in it and pay rent. Ask your local council for details.

Thrugelmir

geneer wrote: »

Come in number 9, your time is up.

The consumer debt overhang will keep interest rates low which in turn will reduce arrears. Ahead is a long long slow road to recovery.

Loughton_Monkey

But some housing insiders claim the UK is set to experience an "arrears timebomb", which will go off as soon as rates rise next year.

Maybe it would help if I translated this.....

"Some" = "Two"
"Housing Insiders" = Two of my mates down the pub who once owned a BTL but got repossessed.
"Claim" = "Wish"
"Arrears timebomb" = The Wilsons will have to do a spot of re-mortgaging.
"as soon as rates rise" = i.e. before notice of a higher monthly repayment has been notified, hence proving the arrears were accrued during the current record low interest rate.
"Next Year" = "At some time in the future when we can sneer that arrears have gone up by 1% and can say 'I told you so'."

wotsthat

The number of homes being repossessed fell by 1% in the second quarter of the year to 9,000, compared with 9,100 in the first three months of 2011, according to the Council of Mortgage Lenders (CML). But some housing insiders claim the UK is set to experience an "arrears timebomb", which will go off as soon as rates rise next year.

Not like Geneer to post a good news story - he must be feeling more positive about the economy.

Mortgage repossessions flat, LTV rates decreasing, and lenders doing all they can to keep customers in arrears in their homes.

I'd ignore the "housing insiders" - that's newspaper code for either "we're making this up to pad out the CML press release" or "frankly the source has no credibility".

robmatic

wotsthat wrote: »

Not like Geneer to post a good news story - he must be feeling more positive about the economy.

Mortgage repossessions flat, LTV rates decreasing, and lenders doing all they can to keep customers in arrears in their homes.

I'd ignore the "housing insiders" - that's newspaper code for either "we're making this up to pad out the CML press release" or "frankly the source has no credibility".

All in all it's a very positive article, apart from the headline and that one bloke from a mortgage broker, who seems to be implying it might be a good idea to take out a fixed rate deal before rates rise.

I love a bit of context and analysis.

geneer

The Bulls senor, they no likee.

StevieJ

robmatic wrote: »

All in all it's a very positive article, apart from the headline and that one bloke from a mortgage broker, who seems to be implying it might be a good idea to take out a fixed rate deal before rates rise.

I love a bit of context and analysis.

Through him preferably

TedButler

What I find hard to get my head round is when someone gets repossessed is it a deflationary event?

The bank made up the currency out of thin air but it gets paid to the seller. So the debt gets written off, but the currency is still out there in cerculation.

Thrugelmir

TedButler wrote: »

What I find hard to get my head round is when someone gets repossessed is it a deflationary event?

Not all repossessions are in negative equity.

Banks will make financial provisions for mortgages in arrears and cost of repossession.

So the loss will be absorbed.