Posted by: Jules Birch10/08/2012
Behind the good news story of falling mortgage repossessions a different tale is starting to emerge of rising possession actions against tenants.
Figures published by the Council of Mortgage Lenders (CML) yesterday showed that its members repossessed 8,500 homes in the three months to June. That was the lowest quarterly total since the final quarter of 2010 and implies that the total for the year is likely to undershoot the CML’s forecast of 45,000.
Considering the grim forecasts made in the depths of the financial crisis, that is very good news indeed. A combination of record low interest rates, forbearance by lenders and reforms of legal procedures that led to a dramatic fall in possession actions in 2008 look the most likely explanations. However, that did not stop Grant Shapps from claiming that it was actually down to the government’s action to tackle the deficit.
Things look much less rosy for tenants. Separate figures produced by the Ministry of Justice show that, after falling every year bar one between 2002 and 2010, the number of landlord possession claims rose in 2011 and that the upward trend has continued in the first half of 2012.
The second quarter saw 14,614 mortgage possession claims issued, a fall of 20 per cent on a year ago and a rate of 0.63 per 1,000 households. In contrast, landlords issued 34,554 possession claims, an increase of 4 per cent and a rate per 1,000 households that is two and a half times as high at 1.50.
Meanwhile there were 11,328 mortgage claims leading to possession orders made in the second quarter, a fall of 17 per cent and a rate of 0.49 per 1,000 households. That contrasts with 24,441 landlord claims leading to possession orders, an increase of 8 per cent and a rate of 1.06 per 1,000 households.
Mortgage possession orders made in the second quarter were down in every region of the country compared to a year ago. Landlord possession orders made fell in the North East and were unchanged in the West Midlands and the East, but rose everywhere else.
Landlord orders made rose 15 per cent in London (2.21 per 1,000 households) and by 21 per cent in Inner London (2.55). In contrast, mortgage orders made fell by 17 per cent in London (0.43) and 22 per cent in Inner London (0.31).
Is it just coincidence that London is the region most affected by the housing benefit cuts introduced so far? Or that the possession order made rate per 1,000 households is eight times higher for tenants in Inner London than it is for people with a mortgage?
The disparity also reflects structural changes in the housing market. As I report on my other blog, buy-to-let lending continues to rise remorselessly and landlords now account for one in eight of all outstanding mortgages. That has happened despite the fact that lenders are almost twice as likely to repossess a buy-to-let landlord (the repossession rate in the second quarter was 0.12 per cent) as they are an owner-occupier (0.7 per cent). Clearly both landlords and tenants are more likely to face possession claims than people wth a mortgage.
The figures are more startling when you consider that this does not include cases where an assured shorthold tenancy comes to an end and the landlord decides not to renew.
Figures broken down by type of landlord suggest that a rising proportion of possession claims are coming from private landlords. Second quarter claims by social landlords using the standard procedure were down slightly on a year ago. Claims by private landlords using the standard procedure were up slightly. However, claims under the accelerated procedure rose by 25 per cent to 7,765. The Ministry of Justice says these are by private landlords against tenants with assured shorthold tenancies but I think they include Ground 8 claims by housing associations too.
Social and private landlords both had slightly more claims leading to orders using the standard procedure in the second quarter than a year ago. Orders made using the accelerated procedure were up by 24 per cent.
The contrast between mortgage and landlord possessions also applies when you look back over a longer period.
Mortgage possession claims issued are down by 22 per cent since the election in the second quarter of 2010 and by 63 per cent since the depths of the financial crisis in the second quarter of 2008. Mortgage possession orders made are down by 16 per cent and 62 per cent.
Landlord possession claims issued and orders made are down 5 per cent and 3 per cent since 2008 but up by 10 per cent and 9 per cent since the election.
Before ministers congratulate themselves too much over the fall in the politically sensitive mortgage repossession statistics, they might want to take a look at this worrying rise in possession actions against tenants. And consider that the cuts in housing benefit introduced as part of the deficit reduction that supposedly cut mortgage repossessions have only just begun to bite.
From Inside edge
Housing commentator Jules Birch puts the latest news in context