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Repossessions set for dramatic rise - Shelter

We've been highlighting this particular issue on here for months;)

From the Guardian today, but you heard on here first!

House repossession rates this year could hit levels not seen since the last property crash in the early Nineties, because an increasing number of people have taken out secondary loans on their homes, says the homelessness charity Shelter. Its report is in stark contrast to government assurances that there will be no repeat of the last housing crisis when hundreds of thousands of people lost their homes as prices crashed.

Shelter maintains the number of repossessions will be far higher than the government and mortgage lenders predict because this time around many homeowners have taken out loans secured against their property as they cash in on inflated house prices. Often the loans have been used for holidays, home improvements or to pay off credit cards.

The charity calculates at least 20 per cent of repossession orders now being issued by county courts are due to lenders taking action against people who have secondary loans on their homes. On this basis, Shelter estimates the true number of repossessions this year is likely to be about 53,000.

The figure is close to the 59,000 repossessions in 1993, when the UK was last in the middle of an economic downturn. 'We are finding lots of cases where lenders of other financial products are taking action [to repossess a home] themselves,' said Adam Sampson, chief executive of Shelter. 'And those ones, by and large, are not counted in the statistics; but they will add substantially to the total number of people who will lose their homes. Initial indications are that it could increase the total number by a fifth, but it could be worse than that.'

A particular concern for Shelter is that many companies pushing secondary loans are prepared to issue repossession orders even when a home owner defaults on small payments. While the mortgage lenders are usually prepared to give the homeowner some breathing space, the secondary lenders appear less forgiving. The charity says it has examples of people losing their homes for defaults on second loans of as little as £10,000.

Given falling houses prices, many homeowners find they have little room for manoeuvre when it comes to paying back debts on their secondary loans. As a result many are not even contesting the orders. At Kingston Crown Court, for example, only 29 per cent of people subjected to a repossession order turned up to defend themselves in the first quarter of 2007, compared with the last quarter of 2006.

Shelter suggests the figures - which precede the collapse of Northern Rock and the subsequent downturn in the housing market - indicate the country is heading for a far worse housing crisis than even the most pessimistic forecasts.

The government argues the chances of people falling into negative equity is remote. But Sampson said he was not convinced. 'If house prices do start dipping steeply, the later entrants will experience negative equity,' he said. 'More people own than their own homes than at almost anytime in history and the total level of indebtedness has gone up. For both those reasons I don't think we can be over confident.'

Shelter is calling for secondary lending to be regulated like mortgages to prevent a future crisis. It also wants more help for those who get into debt.
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Comments

  • PasturesNew
    PasturesNew Posts: 70,698 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic

    Shelter maintains the number of repossessions will be far higher than the government and mortgage lenders predict because this time around many homeowners have taken out loans secured against their property as they cash in on inflated house prices. Often the loans have been used for holidays, home improvements or to pay off credit cards.
    Yes, credit - and in such unprecedented amounts - has never been available to the great unwashed masses before.

    People have literally had a throw away and casual attitude to debt and setting it against their houses. As if it were their money and yet free money. Treated it like lottery winnings even. Didn't fret over one penny of that spending at all.
    'We are finding lots of cases where lenders of other financial products are taking action [to repossess a home] themselves,' said Adam Sampson, chief executive of Shelter.
    In the earlier times of securing your debt against your house this was always made a big nasty black statement "Your house will be repossessed if you don't keep up the payments" like the sword of damocles hanging over your head.

    That fear of God being put into people at the outset has in recent years been swept under the carpet, dismissed, overlooked, not of any importance. The money was there and it would never happen. It failed to stop and make people think in recent times.

    A particular concern for Shelter is that many companies pushing secondary loans are prepared to issue repossession orders even when a home owner defaults on small payments. While the mortgage lenders are usually prepared to give the homeowner some breathing space, the secondary lenders appear less forgiving. The charity says it has examples of people losing their homes for defaults on second loans of as little as £10,000.
    I would dispute that a default of "as little as £10,000" is a little really.... it seems a LOT to me, but my brain still thinks like it did in the 70s/80s about debt. Fear.

    Shelter is calling for secondary lending to be regulated like mortgages to prevent a future crisis. It also wants more help for those who get into debt.
    I didn't realise it wasn't regulated. I guess we all assume that there's a level playing field.

    I find it quite sad when people are repossessed when it seems their downfall was remortgaging their house to pay for a holiday, new car, conservatory and new kitchen. It seems reasoning went out of the window about the value of money and the simple overlooked fact of "how are you going to pay it back?"

    I wish people well. These are hard times we are entering. Hard times that a lot of the current generation haven't seen before. Life is about to b1tch-slap them up the 4rse and they won't have seen it coming as they've been born into the "me me me, have it now, plastic, plastic, plastic" lifestyle. They never lived with the Cold War fears of death in the 60s, the almost similar credit crunch due to irresponsible lending of some small institutions of the 70s, the strikes/3-day week/food shortages and redundancies of the 70s, the negative equity and falling house prices of the 80s.

    For them, and those that forgot, life's only ever been one sweet dream of onward, upward and optimism.
  • Trollfever
    Trollfever Posts: 2,051 Forumite
    My understanding.

    Shelter is calling for secondary lending to be regulated like mortgages to prevent a future crisis.

    Use your secondary loan for consumer purchases up to £25k and it is regulated.

    Use your secondary loan for business purposes (BTL) and it is not regulated.
  • silvercar
    silvercar Posts: 48,689 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    Shelter maintains the number of repossessions will be far higher than the government and mortgage lenders predict because this time around many homeowners have taken out loans secured against their property as they cash in on inflated house prices. Often the loans have been used for holidays, home improvements or to pay off credit cards.

    Round here a lot of loans have been taken out to pay for private school fees due to the inadequacy of a lot of local schools and the impossibility of getting school places at successful schools.

    Doesn't make it right or wrong. For whatever reason, people are losing their homes and struggling.
    I'm a Forum Ambassador on the housing, mortgages, student & coronavirus Boards, money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • Markyt
    Markyt Posts: 11,864 Forumite
    This is why the gov want lenders to put in place the repo & rent back scheme.

    Course, if they didn't pay a mortgage, why will they pay rent?
  • silvercar
    silvercar Posts: 48,689 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    Markyt wrote: »
    Course, if they didn't pay a mortgage, why will they pay rent?

    Course, if they couldn't pay a mortgage, how will they pay rent?

    Rent should be cheaper than a mortgage.

    House maintenance and insurance wont add to the tenants costs.
    I'm a Forum Ambassador on the housing, mortgages, student & coronavirus Boards, money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • Pobby
    Pobby Posts: 5,438 Forumite
    Cracking post PasturesNew.It will be very sad that many will loose their homes but heck,look at all those silly people that borrowed against their propert to buy nice,shiny things.

    Dunno about you
  • BobProperty
    BobProperty Posts: 3,245 Forumite
    1,000 Posts Combo Breaker
    The worrying thing about this scenario is that the second charge holder is more likely to force repossession than a first charge mortgage holder. Think about it, mortgage holder has, say, 70% of value, second charge holder has 25% of value and borrower starts defaulting. Repossess now and you get your money back. Repossess in 6-12 months and you might not. Which "Dodgy Secured Loan Co" is going to hold out for the borrower making good?
    A house isn't a home without a cat.
    Those are my principles. If you don't like them, I have others.
    I have writer's block - I can't begin to tell you about it.
    You told me again you preferred handsome men but for me you would make an exception.
    It's a recession when your neighbour loses his job; it's a depression when you lose yours.
  • m00m00
    m00m00 Posts: 1,755 Forumite
    also the Dodgy Secured Loan Co, are far more likely to have been absolutely reliant on the securitization secondary markets, which have completely dried up, so will 'need' money in the short term a lot more than Big Banks.

    Sub prime mortgage companies have been reaching for repossessions far quicker than the established banks, and I see no reason to suggest that the picture loans/ocean finances of this world will hold back.
    It's a health benefit ...
  • BobProperty
    BobProperty Posts: 3,245 Forumite
    1,000 Posts Combo Breaker
    m00m00 wrote: »
    also the Dodgy Secured Loan Co, are far more likely to have been absolutely reliant on the securitization secondary markets, which have completely dried up, so will 'need' money in the short term a lot more than Big Banks.

    Sub prime mortgage companies have been reaching for repossessions far quicker than the established banks, and I see no reason to suggest that the picture loans/ocean finances of this world will hold back.
    I would also think it is "built in" to their business model. Like 3 months arrears = get all arrears paid now or repossess. First charge mortgage lending building societies have more of a social conscience and the "Stockport and District Hatmakers and Brewers Building Society" will take a lot longer to decide to repo someone, and go through a lot more stages of trying to work out a deal before going to court.
    A house isn't a home without a cat.
    Those are my principles. If you don't like them, I have others.
    I have writer's block - I can't begin to tell you about it.
    You told me again you preferred handsome men but for me you would make an exception.
    It's a recession when your neighbour loses his job; it's a depression when you lose yours.
  • ROFL @

    "Stockport and District Hatmakers and Brewers Building Society"

    :T
    Living Sober.

    Some methods A.A. members have used for not drinking.

    "A simple book for complicated people"
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