Readers Question: The problem has been the number of defaulters. But for Building Societies there is less than 0.001% of 1% defaulters (Saturday’s Guardian) – where ARE all these houses being repossessed?
You are right that mortgage repossessions amongst building societies are very low. This is because:
- Building societies have to stick to stricter rules about lending than private banks. These regulations mean that they have avoided the worst excesses of the other banks.
- Home repossession in the UK is still relatively low. According to statistics by the council of Mortgage lenders. the number of repossessions in 2007 was 26,000 or 0.22% of all loans. Although this is predicted to rise to 44,000 in 2008 – it is still relatively low.
- Repossessions in Q2 2008 rose to 11,054 (71% increase on same period in 2007)
- However, It is significantly lower than in the last housing boom of 1991. when the number of home repossessions reached over 75,000 or 0.77% of loans.
The real problem behind the credit crunch is the repossessions in the US. It was the defaults on the sub prime mortgage loans that have caused a $1.3trillion black hole in the global financial system. The UK is suffering not because UK repossessions are high. But, because British banks were exposed to the credit defaults in US banks.
See: Subprime Credit Crunch explained
In the Future, repossessions rise because the UK recession will cause unemployment. On the other hand interest rate cuts will help homeowners meet mortgage payments. Interest rates (at 4.5%) are much lower than in the last housing slump.
Rate of Mortgage Repossession in the UK
| Period | 1 | 2 | 3 |
| Mortgages | Properties | Properties | |
| oustanding, | taken into | taken into | |
| end period | possession | possession | |
| in period | in period | ||
| number | number | % all loans | |
| 1972 | 4,770,000 | 1,760 | 0.04 |
| 1973 | 4,862,000 | 1,220 | 0.03 |
| 1974 | 4,910,000 | 3,290 | 0.07 |
| 1975 | 5,076,000 | 4,870 | 0.10 |
| 1976 | 5,322,000 | 4,950 | 0.09 |
| 1977 | 5,582,000 | 4,680 | 0.08 |
| 1978 | 5,896,000 | 4,130 | 0.07 |
| 1979 | 6,058,000 | 2,910 | 0.05 |
| 1980 | 6,210,000 | 3,480 | 0.06 |
| 1981 | 6,336,000 | 4,870 | 0.08 |
| 1982 | 6,518,000 | 6,900 | 0.11 |
| 1983 | 6,846,000 | 8,400 | 0.12 |
| 1984 | 7,313,000 | 12,400 | 0.17 |
| 1985 | 7,717,000 | 19,300 | 0.25 |
| 1986 | 8,138,000 | 24,100 | 0.30 |
| 1987 | 8,283,000 | 26,400 | 0.32 |
| 1988 | 8,564,000 | 18,500 | 0.22 |
| 1989 | 9,125,000 | 15,800 | 0.17 |
| 1990 | 9,415,000 | 43,900 | 0.47 |
| 1991 | 9,815,000 | 75,500 | 0.77 |
| 1992 | 9,922,000 | 68,600 | 0.69 |
| 1993 | 10,137,000 | 58,600 | 0.58 |
| 1994 | 10,410,000 | 49,200 | 0.47 |
| 1995 | 10,521,000 | 49,400 | 0.47 |
| 1996 | 10,637,000 | 42,600 | 0.40 |
| 1997 | 10,738,000 | 32,800 | 0.31 |
| 1998 | 10,821,000 | 33,900 | 0.31 |
| 1999 | 10,982,000 | 30,000 | 0.27 |
| 2000 | 11,173,000 | 22,900 | 0.20 |
| 2001 | 11,247,000 | 18,300 | 0.16 |
| 2002 | 11,364,000 | 12,000 | 0.11 |
| 2003 | 11,529,000 | 8,500 | 0.07 |
| 2004 | 11,511,000 | 8,200 | 0.07 |
| 2005 | 11,604,000 | 14,600 | 0.13 |
| 2006 | 11,742,000 | 20,900 | 0.18 |
| 2007 | 11,822,000 | 26,200 | 0.22 |
| 2008 | 11,300,000 | 40,000 | 0.36 |
| 2009 | 11,300,000 | 46,000 | 0.41 |
| 2011 | 11,300,000 | 40,000 est. | 0.36 |
Note: The number of mortgage arrears is higher than repossessions. People can fall into arrears without having their home repossesed.
Sources for data
home reposession levels Guardian
Hey Tejvan,
I know what you mean, Mortgage default is a reality faced by many homeowners in the face of inflation and rising interest rates. It is a cause of worry because being unable to make mortgage payments on time could lead to foreclosure or loss of the home for the borrower.
Regards
– Paul Harvey @ http://repossession1.com
Thank you for answering my question!