Bev Budsworth, managing director of The Debt Advisor, commented:
“Today’s figures are certainly some good news. The CML has forecast the total number of repossessions in 2010 to be around 53,000 with 205,000 of us slipping into arrears on our mortgage. I think, even by their own admission this may be a little pessimistic but it clearly illustrates that this is still a real issue and one that is not going to disappear soon.
“Government initiatives are clearly helping to some degree for people struggling to meet their mortgage payments especially those with low levels of arrears. However, the CML reported earlier this year that numbers of those with higher levels of arrears have remained broadly unchanged and have not seen a reduction. The economic climate is, at best, uncertain and extremely fragile at the moment and there are a number of factors that could detrimentally affect future levels of arrears and repossessions.
“The main factor that is helping to keep a lid on the levels is the all time low interest rates which have been kept at 0.5% since March 2009. If rates start to rise, then this, coupled with drastic public spending cuts expected from the new government, would mean that many thousands of people would be pushed over their ‘tipping point’ and struggle with their mortgage repayments.
"If interest rates do rise, I expect to see a steady increase in arrears and repossessions throughout 2010.
“Unemployment is also a major factor, people have to keep the money coming in to keep paying their mortgage. Unemployment remains at 8% or 2.51 million, the highest level since December 1994. The fact remains that the majority of people default on their mortgages because of sudden loss of income.
"The highest public expenditure cuts since the 1970s from the coalition government will simply exacerbate the problem as more and more public servants will be cut to pay for the unprecedented levels of public borrowing. Unemployment and repossessions are inextricably linked and could get far worse if inflation and interest rates rise.
“As well as loss of income, other factors such as the breakdown of a personal relationship can often lead to mortgage arrears as one spouse finds it increasingly difficult to support the family home singlehandedly.
“We’ve just seen personal debt rising to record levels once again which may be pointing to an incessant love affair with spending. Too many people have overstretched themselves and are laden in debt. They simply cannot afford to pay their bills and end up defaulting on their mortgage, or worse, losing their homes.
“The ‘Communities and Local Government’ website recently reviewed nearly 15,000 repossessions cases between January 2008 and August 2009 and concluded that over a third of these repossessions were voluntary.
“This means that 5,400 simply gave up and handed back the keys to their property. Analysing these figures further shows that 70% of these cases were borrowers under 44 (35% under 34) and that nearly two-thirds had borrowed more than three times their household income, all this in the middle of a ‘credit crunch’ and the longest recession for 60 years.
“This shows that even though today’s figures are down, young borrowers and first time buyers are still at the greatest risk of repossession. These people are most likely to give up and hand back their keys and it’s these people we need to help the most. There is help out there and options available to ease the pressure and keep the roof over their head.
“Speak to your lender as early as possible. Do your homework, work out what you can afford to repay with a simple income / expenditure calculation and present them with a solution, not just a problem.
"It’s always worth remembering that you can reduce your outgoings on unsecured debt by considering an Individual Voluntary Arrangement (IVA) or debt management plan, you must always prioritise your secured debts such as your mortgage and any arrears!”
