The Council of Mortgage Lenders (CML) have reported that there were 8,900 homes repossessed in the three months to October, which was a drop of 5% compared with the previous quarter. This is the fourth quarter in a row that numbers have dropped since they reached a peak of 12,200. The CML have warned that the trend of falling repossessions could reverse.
I was recently at an insolvency conference and one of the topics discussed was that there had not been the explosion of repossessions in either residential or development property that was initially expected. I think this is down to a number of reasons but the main one is that the historic low levels of interest rates means that borrowing for both individuals and businesses is affordable. From my discussions with various lenders, I think they are taking a more pragmatic view of what is the point of repossessing or taking over a development site if there is little or no chance of selling this on in the open market?
I think this flags potential problems when the economy starts to improve. As interest rates rise, this could make mortgage payment unaffordable, increasing the number of people who fall into arrears. As the property market picks up, I think lenders will be more inclined to repossess or take over development sites as they realise they have more of a chance of selling them on. I also know that a number of the large banks have set up their own holding companies and have transferred ownership of a number of development sites to these holding companies waiting for market recovery. This is something that I will continue to monitor as it is likely to have a knock-on effect to at least the short to medium term house prices.
Head of Property Services
- Home repossessions fall as interest rates stay low (independent.co.uk)