Mortgage default and repossession rates in UK

  • Home repossession – when banks take homes back into their own ownership,
  • Mortgage arrears – when mortgage holders fall behind in their mortgage payments, but not necessarily leading to repossession
  • For 2013, the Council of mortgage lenders anticipate a total of 35,000 repossessions. In Q1 2013, the rate of repossession is running at 0.07% or 1 in 1,400 homes. This is the lowest rate since 2008. (Source: CML)
  • In 2012, 157,900 homes were in arrears.
  • It estimated, that 160,000 mortgages will be in arrears of 2.5% or more by end of 2013.

reposession-rates

This repossession rate of 0.07% is significantly lower than the last housing bust and recession of 1991-92. In that period, the repossession rate peaked at 0.7% of homes.

Why is repossession rate low during credit crunch?

Low interest rates. The main difference between the 1991 crash and the great recession 2008-13 is the difference in interest rates. In 1992, the government increased interest rates to 15% in an attempt to reduce inflation. Unsurprisingly, these high interest rates caused many homeowners to be unable to afford mortgage repayments, and so the repossession rate increased. In 2013, we have had a period of very low interest rates since March 2009. Base rates are 0.5%. Homeowners on tracker mortgages are facing very low mortgage payments. Fixed rate mortgages are still very low compared to previous years.

base-rates-bank-rates-mortgage-rates

Even though bank lending rates haven’t fallen as much as base rates, mortgage payments are relatively low, and more attractive than renting.

Read moreMortgage default and repossession rates in UK

Reason for Mortgage Defaults

Readers Question: What have been the drivers of the mortgage default rate in the 2008 recession compared to the late 1980s/ 1990s? Despite the depth of the recession in 2008, the mortgage default rate in the UK has  been lower in the current recession than in the early 1990s. The peak for home repossessions occurred …

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Falling Behind With Mortgage Repayments

Discuss the economic problems that might arise from large numbers of people falling behind with their mortgage repayments The problems of people falling behind with their mortgage payments include: Mortgage defaults will rise causing people to sell houses. If people are forced to sell houses the increased number of houses on the market will depress …

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Student Guide To Mortgages

In the UK, there is a strong desire for people to own their own house. This deep seated desire is one of the factors behind the extraordinary rise in UK house prices. However, the cost of houses means that it is becoming increasingly difficult for people to get on the property ladder. To be able …

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