2007 repossessions lower than expectations

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by Kay Murchie

During 2007, repossessions soared by over 20% to hit an 8-year high but this figure was considerably lower than the one forecast by the Council of Mortgage Lenders (CML).

Fewer than one in 400 mortgages resulted in repossession last year, according to CML figures. The repossession rate stood at 0.23% for the whole of last year, less than half the rate experienced in the early 1990s.

However, experts in the property industry believe the number of repossessions is being kept artificially low due to the significant growth in the number of sale-and-rent back companies.

These types of companies target those struggling to the meet the cost of living in their homes. The firms offer to purchase homes at below market value and rent them back to the former owners.

The majority of these companies offer no residence guarantee beyond 6 or 12-month tenancies, leaving former homeowners at risk of eviction.

Michael Coogan of the CML said that predicting the number of repossessions this year will be difficult. While the rumbling effects of the credit squeeze may still be felt, they will be muted by a falling base interest rate.

In spite of this, the amount of repossessions is likely to be higher this year as a consequence of broader issues in the economy and the mortgage funding markets continued Mr Coogan.

Howard Archer, of analysts Global Insight, added that the financial pressure on many homeowners is increasing and it seems certain repossessions will trend up considerably this year, especially if the economy suffers an extended marked slowdown and unemployment starts increasing.