WHAT is mortgage rescue? And who is being rescued? In England, so far, it seems to be about saving the banks, developers and, if this week's Inside Housing story is anything to go by, the government's image.

In contrast, the devolved administrations in the rest of the UK seem to be concentrating on rescuing hard-pressed home owners. Within the last month, the Welsh government has announced an extra £5m for its mortgage rescue scheme and the Northern Ireland government has revealed plans for one scheme for mortgage to rent and another for reverse staircasing. 

In England, a working group of associations, lenders and the CLG is discussing a national mortgage rescue scheme. Meanwhile the Chartered Institute of Housing is calling for a reverse equity scheme to enable social landlords to buy part of a home from owners in trouble. But an 'additional' £9m for face-to-face debt advice turns out to be not quite what it said on the tin.

As became clear during the last housing market recession, mortgage rescue schemes are by no means a panacea. However, with 45,000 repossessions forecast this year, it is clear that the government needs to find a counterpart to its £50m credit facility for the banks and its £200m mini-housing market package to buy unsold homes from developers. And it will have to do better than a 'rescue package' which is actually a cut.

Posted by Jules Birch, June 13

Posted in Repossessions , Wales, Northern Ireland

RISING rents, falling prices - now must surely be the time to buy to let? That's the message from industry cheerleaders to prospective new landlords and it's one that beleaguered housebuilders must wish they heed. But should they?

Statistics released this week by the CML [download here] show that, far from collapsing as some people predicted, buy to let continues to grab a larger share of overall lending. While the number of new buy-to-let loans in the first quarter of the year was down 8% on a year earlier that compares with a 35% fall in overall mortgage lending. Buy to let accounted for 13% of mortgage lending while 1,073,300 mortgages were outstanding  - a rise of 5% on the previous quarter and 21% on a year ago. 

So far, so good for the cheerleaders - especially when put alongside the RICS lettings survey earlier this week that showed increases in the number of surveyors reporting higher rents and a fall in those seeing landlords sell when leases came to an end. Not so good for anyone looking for an affordable home who cannot afford to buy and does not qualify for social housing - or for local authorities looking to secure private sector accommodation.

But other CML statistics show that a more mixed picture.  Arrears and repossessions among buy-to-let landlords [download here] are still lower than for home owners as a whole but they are catching up rapidly. The proportion of buy-to-let homes repossessed has doubled since the end of 2006.

In the first quarter of the year, lenders repossessed 859 buy-to-let homes - compared to 443 a year ago. Even more alarmingly for lenders, they had 1,610 repossessed buy-to-let homes on their books - compared to just 620 a year ago. How long before the music stops?

Posted by Jules Birch, May 23 

Posted in Buy to let, Repossessions

INCREASED funding for debt advice and free legal representation at country courts sounds like a sensible response to the 17% rise in repossession orders revealed by the Ministry of Justice this morning. It's a sign of the political sensitivity of the issue that this morning's papers had already been briefed about an announcement due later from chancellor Alistair Darling and housing minister Caroline Flint.

But the really remarkable thing about the figures is not the size of the increase but the fact that nobody really knows how many people are being repossessed.

The Ministry of Justice reports repossession claims issued and orders made in county courts. Both have doubled in the last four years. The number of claims issued last year was the highest since 1992 and the number of orders made the highest since that 1993.

Contrast that with the figures released by the Council of Mortgage Lenders (CML) on the number of actual repossessions - not all orders result in repossessions because lenders can abandon proceedings even after an order has been made. 

According to the CML there were 27,000 repossessions last year - the highest total seen in the noughties but less than half the level seen in 1992 and 1993 - and predicts 45,000 in 2008.

Why the discrepancy? Have lenders become more lenient in letting people off after getting a possession order? That seems unlikely - the CML figures also show that repossessions are rising much faster than arrears and last year it radically revised its repossession figures upwards after including figures from more specialist lenders.

A more convincing explanation is that the CML figures only include repossessions made by first-charge lenders. Many borrowers have second loans for things like home improvements (and some may have three, four or more) and nobody knows how many people are getting repossessed by second-charge lenders.

The best guess, from anecdotal evidence from the courts, is that the real number of repossessions is 20% higher than the CML figures shown. Given the growing crisis in the housing market, getting accurate figures should surely be a priority.

At least ministers can look at the international pages of the papers and think that at least things are not as bad here. Legislation just passed by the US House of Representatives would set up a $300bn dollar insurance fund to help up to 500,000 American homeowners in trouble.

That is until they read the business pages and find two City analysts concluding that a US-style housing crash is already here. 

Posted by Jules Birch, May 9

Posted in Repossessions

DON'T panic. Buy-to-let landlords are holding firm in the wake of house price falls and just 2% are planning to sell when their tenants' leases expire. Panic. The banks are pulling the plug on buy-to-let loans and the era of the amateur landlord has effectively ended.

Two contrasting stories this weekend from The Independent and The Times that illustrate all too clearly the confusion, exaggeration and feverishness of media coverage of the housing market at the moment.

The Indy's 2% comes from a survey by the RICS in the wake of the cut in capital gains tax at the start of April that gives landlords an incentives to cash in now and keep more of their profits. Rather less convincingly, that's backed by quotes from buy-to-let lenders and mortgage advisors who, surprise, surprise, argue that now could be the time to buy.

In complete contrast, The Times says that lenders are either pulling out of the buy-to-let market or severely tightening lending criteria for anyone without a substantial deposit.

But it's not just buy to let that has the media not knowing where to turn. A forecast over the weekend by the Centre for Economic and Business Research that repossessions will rise 25% this year to 33,000 got extensive coverage in the papers and on the BBC - including half of today's World at One. Dire news though that is it makes you wonder where they were in October when, before the credit crunch had really started to affect the housing market, the Council of Mortgage Lenders forecast a 50% rise to 45,000 in 2008.

All will become much clearer - or will it? - later this week when the Halifax and Nationwide release house price surveys that could see annual house price inflation go negative for the first time. The latest ones from the Land Registry (for March) and Hometrack (for April) both show monthly falls. 

Posted by Jules Birch, April 28 

Posted in Buy to let, Housing market, Repossessions

VAGUE pledges to use repossession only as a last resort. Pleas my ministers to the banks to pass on the effects of any interest rate cuts to borrowers. A review of codes of practice by the end of May. At first sight, yesterday's meeting between the government and mortgage lenders appears to have achieved little - let alone the responsibilities to go with the £50bn of rights that lenders got the day before.

But who was at yesterday's meeting - and who was not - may turn out to have more long-term significance than anything that was agreed. Meeting chancellor Alistair Darling and housing minister Caroline Flint were Michael Coogan, director-general of the Council of Mortgage Lenders (CML), representatives from the Abbey, HBOS, Nationwide and C&G and Stephen Sklaroff of the Finance and Leasing Association (FLA). 

Mortgage lending - and repossessions - are about far more than the loans made by the big High Street banks and building societies. The increase in repossessions to 27,000 last year was driven primarily by sub-prime lenders. None of them were at the meeting yesterday, which seems a curious omission, although as members of the CML and as mortgage lenders, they are regulated by the FSA and subject to the same code of practice as prime lenders.

But prime and sub-prime lenders are not the only firms that can seek to repossess borrowers in arrears, which is why it was good that the FLA was included. It represents second-charge lenders, who make loans for things like double glazing or other home improvements that are secured against the home.

Second-charge lending is regulated by the Office of Fair Trading in the same way as personal loans and credit cards. But requirements for reporting information are much less rigorous than for first-charge mortgages, which are regulated by the Financial Services Authority.

That gap could be hiding a much bigger repossession problem since the CML statistics only cover first-charge mortgages. Nobody knows how many repossessions are initiated by second-charge lenders but anecdotal evidence from advisers suggests they are rising fast. 

The industry agreed 'to review their voluntary arrangements, codes and other commitments and report back to Ministers by the end of May 2008'. With repossessions - officially recorded ones - expected to rise to 45,000 this year it is surely time to look again both at the regulation arrangements and at the true scale of the problem. 

Posted by Jules Birch, April 23 

Posted in Repossessions