Repossessions on the Rise

The national media continue to provide us with their predictions for 2012 and while there are mixed feelings about many areas of the property market, a general consensus hints at a gloomy twelve months for house repossessions.

The Council of Mortgage Lenders claim that with unemployment set to rise even further next year, more property owners will be forced to surrender their homes as the economic situation fails to improve.

The CML suggest that repossessions in 2012 will not hit the high levels of 2009 but they still forecast a rise from a 2011 figure of 37,000 to 45,000 in twelve months’ time.

“The household sector has been under financial pressure for some time, as a result of falling real incomes, and more recently higher unemployment,” said Bob Pannell, the CML’s chief economist.

“This is likely to unwind some of the improvement in mortgage arrears we have seen over the past two years and lead to a somewhat higher level of possessions in 2012.”

Anyone looking for a positive slant on the story could look to a similar prediction from the CML at the end of 2010 and one that subsequently proved to be unfounded. At the time, the organisation cited low interest rates and flexibility on arrears from lenders but this time around they are certain they will be proved right.

Rising unemployment is cited as the main reason for an overall increase in arrears and with lenders unable to accommodate as they reach tipping point, increased levels of repossession would be a sad and inevitable conclusion.

“Over recent months, as fiscal cuts have begun to be felt, the UK has seen a sharp increase in headline unemployment figures, and the Office for Budget Responsibility envisages a higher level of joblessness persisting through next year and beyond,” the CML added.

“With higher unemployment and a prospect of real incomes stabilising at best over the course of the year, we should expect to see increased signs of financial stress.”

In an overall scenario that will fail to bring any cheer to the market, the CML are also predicting that mortgage lending and overall sales will also drop in 2012 as many providers will either tighten their criteria or simply fail to find the funds.

However, it’s the suggested increase in repossessions that will hit the headlines and if they come true, it will be the worst news for this area of the market since 2009.