Repossessions are falling while government rescue and support schemes are floundering. Is the glass half-full or half-empty?
In the wake of the credit crunch and the housing market crash the government was absolutely determined to avoid a repeat of the repossessions crisis of the early 1990s, which saw 300,000 families lose their homes in six years. That determination increased even more when the Council for Mortgage Lenders forecast that this year would see 75,000 repossessions - approaching the peak last time in 1991.
The response was to throw the kitchen sink at the problem. Mortgage rescue would help up to 6,000 families through shared equity and mortgage to rent, lenders’ arms would be twisted to show forebearance, a new pre-action protocol would help in the courts, homeowner mortgage support would enable people to defer payments, cuts in income support for mortgage interest would be restored. All this while the Bank of England cut interest rates to a record low and devised all kinds of ingenious schemes to kickstart mortgage lending.
Taken on an individual basis, the schemes are open to criticism. As Inside Housing reports today, bureaucracy and reluctance by housing associations to get involved mean that the mortgage rescue scheme simply does not have the capacity to help 6,000 families. Meanwhile, lenders that are not owned by the government are steering clear of the homeowner support scheme.
Some of this is not surprising. One of the key lessons of the early 1990s housing market crash was that people prefer help to retain ownership of their homes to mortgage rescue.
Taken as a whole, though, the government schemes do appear to have succeeded in preventing a repeat of 1991. The latest CML figures showed that repossessions fell between the first and second quarter of this year. Given that, mistakes within individual schemes can perhaps be forgiven.
The key thing now is not to become complacent. Repossessions still look set to be up to twice the level seen two years ago and it’s quite possible that all the action taken by the government and Bank so far has delayed rather than prevented the crisis. Unemployment is still rising and a second wave of repossessions could easily follow when interest rates eventually rise.
One crucial issue is that many of the support schemes are time- limited. But at least the government has bought time to get its response right.
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