Repossession Figures Continue to Decline along with Trust Deed numbers.

26th August 2010

Earlier this month the Council of Mortgage Lenders released repossession figures for the second quarter of 2010. The figures were down 4% versus the first quarter of 2010 and down 20% on the corresponding period in 2009.

This pattern is very similar to the reduction in Trust Deed cases and bankruptcies in Scotland versus last year.

Clearly the change in these figures represents good news. However, it cannot be forgotten that behind these statistics are 9,400 families who lost their homes within a three month period.

Fears exist however that the number of repossessions could rise sharply over the coming years. Three specific issues can be identified for the coming months and years:

• The repossession numbers themselves have been subject to downward pressure as a result of the rise in “sell to rent” schemes where struggling homeowners sell their homes, often at greatly discounted values, to companies that then allow them to rent the property and remain living there. Many people who would have lost their homes in the past are able to stay now but at the cost of a discounted sale value and no long-term guarantee of being able to stay in the property. If house prices were seen to be in further decline the attraction of such purchases to the “sell to rent” sector could temporarily reduce.

• The “credit crunch” has left many people in a position that they cannot remortgage with a new lender. This has led to many people being transferred onto their lenders standard variable rate. At a time of historically low interest rates this has been welcome news for many homeowners who have seen their mortgage payments reduce significantly. However interest rates are at threat of increasing as a response to stubbornly high inflation figures. When the inevitable happens and interest rates return to levels closer to the historical average many homeowners face sharp increases in mortgage payments that may not be affordable for many.

• A third threat to the repossession figures is the expected reduction of the public sector by as many as 600,000 jobs as the Government cuts back expenditure. While many of these employees will find new employment quickly this may be at a cost of accepting a reduced pay package that causes them to struggle with repayments. For others a period of unemployment may lead to mortgage arrears that create a threat to their home.

These three threats also seem likely to increase the pressure on consumers struggling to manage unsecured debts such as credit cards, loans and overdrafts.

Recent statistics for Trust Deed cases and bankruptcies in Scotland show a remarkably similar pattern to that seen with repossession figures; a 16% fall versus the same period last year.

Debt advisory companies and charities are reporting increases in the numbers of people approaching them for advice at the current time even without an increase in mortgage interest rates and without any large scale public sector redundancies.

Anyone who finds themselves facing debt repayment pressures would do well to take advice at an early stage. By doing so the options to resolve the problem may well be more attractive and less severe that if the problem is allowed to develop and grow. The option of a debt management plan, the Debt Arrangement Scheme, a Trust Deed or even bankruptcy ensures that there is always a solution to any debt problem.

Trust Deed Firms