Repossessions drop to 18-month low

wotsthat

http://www.bbc.co.uk/news/business-19192122

The CML said repossessions were being suppressed by low interest rates and help for unemployed mortgage borrowers

A key factor in the better-than-expected outcome so far has been the impact of the government's SMI scheme.

This covers the mortgage interest payments of unemployed people on up to £200,000 of their home loan.

The support kicks in after a 13-week waiting period - a temporary rule that has been in place since the start of 2009.

However, the scheme is due to revert to its original 39-week waiting period at the end of this year.

CML forecasted 45,000 repo's for the year. Looks like another year where they've been way over the real figures. Not sure how they can blame SMI either as it's not as if it's a new scheme that's appeared since making their 2012 forecast.

Graham_Devon

It's plainly obvious how SMI is affecting things.

Not only does it hold off repo's, it also allows people who can't afford the house they live in, to continue living in it.

Therefore it stops repo's AND stops what would normally be completely normal sales by completely normal people readjusting their lifestyle to their income. As it stands, they don't have to. They can live over and above their income.

Theres just people who don't want to see it this way, so won't. Including yourself. SMI is a direct intervention into a market. Therefore, the market is not natural. SMI has been around a long time, yes, but not at the very generous levels it is now. You couldn't just continue to have SMI pay the interest on your loan indefinately before 2009. You can now.

wymondham

Graham_Devon wrote: »

It's plainly obvious how SMI is affecting things.

Not only does it hold off repo's, it also allows people who can't afford the house they live in, to continue living in it.

Therefore it stops repo's AND stops what would normally be completely normal sales by completely normal people readjusting their lifestyle to their income. As it stands, they don't have to. They can live over and above their income.

Theres just people who don't want to see it this way, so won't. Including yourself. SMI is a direct intervention into a market. Therefore, the market is not natural. SMI has been around a long time, yes, but not at the very generous levels it is now. You couldn't just continue to have SMI pay the interest on your loan indefinately before 2009. You can now.

Excellent post, and one that is on the nail!!

The tax payer is in effect giving people the means to fund their private home purchase, denying others the opportunity by keeping prices high. 100% wrong and will fail.

wotsthat

Graham_Devon wrote: »

It's plainly obvious how SMI is affecting things.

Not only does it hold off repo's, it also allows people who can't afford the house they live in, to continue living in it.

Therefore it stops repo's AND stops what would normally be completely normal sales by completely normal people readjusting their lifestyle to their income. As it stands, they don't have to. They can live over and above their income.

Theres just people who don't want to see it this way, so won't. Including yourself. SMI is a direct intervention into a market. Therefore, the market is not natural. SMI has been around a long time, yes, but not at the very generous levels it is now. You couldn't just continue to have SMI pay the interest on your loan indefinately before 2009. You can now.

You've missed the point I've made.

I'm not saying that SMI won't have helped limit the number of repo's but that it's ridiculous for the CML to use SMI as a reason why their prediction was out. It's not as if the CML were unaware of SMI when they made their prediction.

Every year there's great excitement when the CML repossession forecast comes out. Every year they get it wrong by quite a long way.

chewmylegoff

Graham_Devon wrote: »

It's plainly obvious how SMI is affecting things.

Not only does it hold off repo's, it also allows people who can't afford the house they live in, to continue living in it.

Therefore it stops repo's AND stops what would normally be completely normal sales by completely normal people readjusting their lifestyle to their income. As it stands, they don't have to. They can live over and above their income.

Theres just people who don't want to see it this way, so won't. Including yourself. SMI is a direct intervention into a market. Therefore, the market is not natural. SMI has been around a long time, yes, but not at the very generous levels it is now. You couldn't just continue to have SMI pay the interest on your loan indefinately before 2009. You can now.

my understanding (from reading the direct gov page) is that before 2009, SMI could be indefinite, but since 2009 you can only claim it for a max of 2 years.

the figures we were batting around on the other thread on this suggested that in 2009 there were about 80,000 people in receipt of SMI who are not pensioners. assuming that most of the pensioners were in receipt before 2009, that suggests about 40,000 people a year are benefiting from SMI.

whilst SMI is obviously affecting things to some extent, and suppressing the number of repos, say 20,000 (half of those 40,000) extra were repossessed each year then would it really make a huge amount of difference to anything? we would be talking about perhaps 2.5% more property transactions per year in total (i think running at about 800,000 at the moment).

i suspect that any impact would also likely be concentrated into the areas which are already falling anyway (because the reason that prices are falling in certain areas is presumably because more people losing their jobs / taking pay cuts in those areas therefore likely to be more SMI claimants as a % there than elsewhere).

Graham_Devon

wotsthat wrote: »

You've missed the point I've made.

I'm not saying that SMI won't have helped limit the number of repo's but that it's ridiculous for the CML to use SMI as a reason why their prediction was out. It's not as if the CML were unaware of SMI when they made their prediction.

Every year there's great excitement when the CML repossession forecast comes out. Every year they get it wrong by quite a long way.

They stated it's a key factor. The only reason it's highlighted is that there is pressure on the government not to change it for the worse at the end of this year, but to make it even more widely available. For instance, they want the 2 year cut off removed altogether.

The others reasons they state are:

1. Lenders being very generous when it comes to forebearance. For example, there are 28,000 households in arrears of over 10%. The numbers in 10% or more of arrears is continually, allbeit slowly increasing.

Someone on a media site has suggested that's basically 2 years worth of missed payments. However, part and fully nationalised banks are basically not reposessing, hence the reason for the numbers continually increasing. The number in 10% of arrears or more has double since 2008. It's not a normal number. People often refer to reposessions of the 90's increasing. This isn't happening now, but instead, the number of people in serious arrears is increasing instead. It's just managed differently.

2. SMI doing exactly what I stated. Letting people live in private accomodation that they otherwise could not afford. This can have a mix of situations, as I explained above. It stops people needing to sell (and therefore stops increasing property coming to the market, stopping decling values), and stops reposessions for the other end of the spectrum where people have no, or little equity, but continue to live in something they could not otherwise afford.

3. Low interest rates. Obviously this is helped housing. There is no way of denying it.

4. Government stimulus, such as schemes meaning people can buy something they otherwise couldn't afford (newbuy etc).

Put all those factors together, and you'll see the bigger picture. Focus on every individual item and you are less likely to appriciate the underlying issues.



The 10% arrears ting is simply being managed. At some point something will have to give. Granted though, it could be many years down the line that it gives.

Basically, when looking at the full picture, you have an increasing number of people on SMI. You have an increasing amount of people at higher arrears and you have an increasing amount of people under "forebearance". One thing that's common throughout is the word "increasing".

ess0two

wymondham wrote: »

Excellent post, and one that is on the nail!!

The tax payer is in effect giving people the means to fund their private home purchase, denying others the opportunity by keeping prices high. 100% wrong and will fail.

Lesser of two evils,the government would have to pay either way to house these families.

shortchanged_2

Lets face it, even if SMI has been around in one form or another for years, it's blatantly obvious that more people are using it now than in the past simply because as Graham ascertains there are much more people who are in houses today that they simply can't afford because of the overpriced housing market of the previous decade.

Graham_Devon

And as an addition, and something that many would prefer to ignore is....

Many on SMI will be on interest only deals. Therefore, some could be paying nothing to live in the house, but at some point, they will have to pay the capital off. Obviously, if they have qualified for SMI, they have no means of paying the capital off.

It keeps the status quo though.....for now.

Some on interest only will be getting some capital paid off from the SMI payments (if their interest rate is under 3.6% currently). So they will literally be paying nothing on the mortgage each month, will likely be in arrears, have the taxpayer paying the capital down (though small amounts) and it still leaves the question of paying the capital off.

These people will usually fall into the camp whereby they only have 2 years. However, one thing I can't find is how SMI works. Do you have for instance an entitlement to 2 year per mortgage, or can you reapply again after 13 weeks.

I believe, though stand to be corrected, that you can reapply after 13 weeks and start another 2 years. I've got no evidence of this other than what I read on an article surrounding it. But it makes sense.

chewmylegoff

shortchanged wrote: »

Lets face it, even if SMI has been around in one form or another for years, it's blatantly obvious that more people are using it now than in the past simply because as Graham ascertains there are much more people who are in houses today that they simply can't afford because of the overpriced housing market of the previous decade.

you don't just get SMI because you cannot afford to pay the mortgage interest. there appear to be two main categories of claimants:

(i) pensioners (presumably where their income post retirement is not sufficient to pay mortgage interest which they could afford prior to retirement)

(ii) unemployed (presumably people who could afford the payments but have lost their jobs)

the significant majority are (i).

you can't just say "i cannot afford my mortgage, can i have SMI now please".

if claimant numbers are up (and i presume that they are, especially as the ceiling was increased from £100,000 to £200,000 of mortgage in 2009), then it is likely that is because more people are losing their jobs because we are in a prolonged period of economic woe, not because houses are overpriced (the value/price of houses being mostly irrelevant).

Graham_Devon

ess0two wrote: »

Lesser of two evils,the government would have to pay either way to house these families.

I dunno how many times you can ignore this (seems quite a lot), but I'll correct you again.

SMI is being paid to people over 60 with average mortgages of 20k. They will have a LOT of equity, and could therefore easily support themselves after a sale. Whether that be downsizing, or renting.

At the average house price of 160k, after fee's, they would have 130k sitting in the bank and therefore would not qualify for housing benefit.

I'm fully aware you and others will ignore this, but for others reading the thread, the truth should be given.

This is from the government / lords themselves:

It is reasonable to assume that most SMI recipients would be able to meet at least some of their SMI obligations out of the equity in their property, with the majority being able to meet them in full.

So please stop arguing it will cost in HB!!