Home Repossessions Down in 2016 – But Will the Downward Trend Continue?

Mon 20 Feb 2017

Repossessions reached their lowest levels in 2016 compared with previous years, with the total lower than the figures recorded every year since 1982.

Official figures released by the Council of Mortgage Lenders (CML) reveal 7,700 homes were repossessed during 2016. This marked a significant drop compared with the previous year, when 10,200 homes were repossessed.

Why the drop?

Darren Pescod, MD of The Mortgage Broker Ltd has said that cheap mortgage rates are believed to be behind the figures. This has meant lower mortgage payments for many people, making it less likely mortgage payers will have trouble meeting their payments each month.

However, the CML also warned that interest rates will eventually rise, and customers should “be ready” for when this happens. Pressure on incomes was also mentioned as a possible hazard that could cause problems with people’s ability to meet their monthly mortgage payments.

More rental properties are being repossessed

The figures also revealed which properties were being repossessed. The most recent peak in repossessions occurred back in 2009, at the height of the recession. At that time, around 10% of repossessions were for rental properties. However, the figure has changed dramatically in recent years. The latest figures show around a third of the repossessions are for rental properties. This is despite the number of repossessed properties falling overall for landlords.

Mortgages in arrears have also dropped

Mortgage arrears also fell in 2016. By the time the year was over, 94,100 mortgages were showing arrears. This was 7,600 lower than in 2015, which ended with 101,700 mortgages in arrears. These figures relate to mortgages that are in arrears of at least 2.5% of the remaining loan.

What will happen next?

Despite the improvements to repossessions in 2016, it is widely believed more properties will be repossessed in 2017 than last year. The figures released by the CML have also been qualified by them in relation to a court case that may potentially have affected the number of repossessions seen. This is of note towards the end of 2016. This makes it more difficult to ascertain a like-for-like comparison against figures for 2015.

Will repossessions rise if interest rates rise?

The Mortgage Broker Ltd responded saying it seems inevitable that this could be the case. People are being reminded to speak to their lenders if they do run into problems making their mortgage payments. Doing so at an early stage often means a solution can be found. Ignoring the problem or evading the chance to speak with your lender can make things worse, and potentially increase the chance of your property being repossessed. Taking early action is vital for anyone who finds themselves in a difficult position.

Viewing the rental market

Buy-to-let properties are being repossessed at lower volumes than was the case in the past, as we have seen. However, they now represent a greater proportion of the total repossessions compared with earlier years. Landlords are being challenged from all quarters thanks to changes in stamp duty and tax laws, and that may account for the difficulties in repossessions too.