The Distress Index uses data on the latest PPR enquiries from distressed sellers to forecast future mortgage possessions, company liquidations and UK unemployment.
PPR saw record enquiries from distressed homeowners, landlords and businesses looking to sell their property in Q.2 2010. The latest data confirms a clear trend of sellers losing buyers, having to drop prices and struggling with debt.
Without the record low interest rates, many more property owners would be imminently facing repossession. For many it seems only a matter of time as loan costs can only go up from here.
While new repossession levels were falling from their Q1 2009 high, PPR now forecast repossessions to rise not just this quarter but for each of the next three. PPR anticipate a total of over 45,000 possessions in 2010 and many more if interest rates increase.
Nick Hopkinson, Director of Property Portfolio Rescue, said:
“The latest Distress Index data highlights a significant shift in market sentiment and is a lead indicator of the mood swing away from positivity within the overall housing market. Our seller enquiries have dramatically increased year-on-year which directly correlates to buyers losing confidence in the market and their own future financial security following the Election result, the inevitable cuts and tax rises to come and the ‘austerity Britain’ we are all now getting accustomed to.
"The mortgage famine is getting worse; homebuyers need a perfect credit rating, huge deposits and are already being charged more than ever for loans as the lending banks struggle to repair their balance sheets.
“Ironically, the number of properties for sale has increased at exactly the same time. The removal of HIPs and the increasing number of sellers trying to catch the growing market of earlier this year has contributed to the current ‘tipping point’ where prices will inevitably fall over for the remainder of the year.
“While ‘official repossessions’ have remained lower than many experts previously predicted this is mainly due to interest rates remaining low and political pressure on the banks to show forebearance. Our increased distressed seller enquiries clearly highlight the growing number of struggling homeowners who see no way out of their financial problems without a fast sale.
"Both company liquidations and unemployment are likely to increase significantly throughout the rest of 2010 which will feed into further borrower difficulty and a growing number of possessions. Government spending cuts have only just begun and the public sector will see significant job losses in the near future.
“It is also unsustainable for Bank of England Base Rate to stay at 0.5% for much longer than six to nine months more given that real inflation is going up by at least 5%, way beyond the Bank’s 2% target.
"Eventually, interest rate increases will have to be used to bring inflation down and it is at this point that those borrowers who have only managed to pay their mortgage because rates are historically low will begin to experience severe payment difficulty.”
