Jules Birch
Take your pick. Repossessions up 71 per cent on last year, 1.2 million households threatened with negative equity, house prices down 2.2 per cent in a single month.
Horror show
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Three different sets of gloomy statistics today must set some kind of record even in this credit crunch.
First, off the mark was the Bank of England with its Financial Stability Report. It says that 500,000 borrowers are already in negative equity thanks to the 13 per cent fall in house prices so far and that another 700,000 will join them if prices fall another 15 per cent.
Speaking of which, the Land Registry house price index shows that prices fell 2.2 per cent in September. This index has lagged the Halifax and Nationwide indices so far but not any more. The huge fall took the annual rate to 8 per cent, with the biggest falls seen in the South West, East Midlands and Wales. The latest figures on transactions (for July) were down 57 per cent on a year earlier.
Then the Financial Services Authority revealed that 71 per cent rise in repossessions. The 11,054 new cases it recorded in the second quarter (up on 6,476 a year ago) took the total so far this year to more than 20,000.
The banks also had 21,407 unsold properties on their books, up 70 per cent on a year ago.
The really scary thing about all these figures is that they cover a period before the big increase in unemployment that is in the pipeline. The FSA figures show that there were 312,000 mortgage accounts in arrears in the second quarter, but that was only up 3 per cent on the first quarter and 16 per cent on a year ago.
How much worse will repossessions get as unemployment, arrears and negative equity rise and prices fall?
Readers' comments (2)
Ralph Feldberg | Tue, 28 Oct 2008 16:01 GMT
How much worse will reposessions get as unemployment, arrears and negative equity rise and prices fall?
A lot.
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michael barratt | Wed, 29 Oct 2008 06:57 GMT
It is perhaps the time to get back to basics and old fashion prudence that has been all but abandoned by New Labour and the banking fraternity.
Instead of pumping public money with abandon into banks without state representation on their boards, perhaps alternatively tax relief should reintroduced in respect to mortgage interest paid by owner occupiers, especially to assist those homebuyers who presently find themselves in a negative equity situation. Perhaps the banks should be required to hold on margin, securities created by Government (60 year negotiable public housing bonds) to assist in financing an effective public housing programme.
Perhaps the Government should limit mortgages to 20 years and permit subsequent extensions to 25 years only in special circumstances. That borrowers must provide at least 5% deposit and have sufficient money to pay all fees associated with the purchase of their home. That banks be required to limit the amount of money lent to not more than three times a 'main' applicant’s annual income and to additionally only take into account a portion of any second person’s income.
Perhaps ‘buy to rent’ landlords should have their wings clipped and present ludicrous tax breaks shelved and a tax on ‘unearned’ income introduced.
Perhaps then house prices will once more become realistic and affordable in relation to family incomes, more housing stock become available for owner-occupiers and an effective public home building programme launched.
Perhaps Government instead of pledging £500 billion to underwrite banks, the Government should retain a faction of that sum and underwrite local authorities in the capacity of being the borrower of last result to permit the borrowing of money from financial institutions on preferred terms for the purposes of launching without delay of a nationwide public house building programme.
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