mlm-editorial, 10 months ago3 min read
According to the Council of Mortgage Lenders, the period of April to June 2015 saw 2,500 homes repossessed in the UK, compared to 3,000 repossessions in the first quarter of the year. The drop looks even more impressive in comparison to the same quarter last year, which saw 5,400 homes repossessed by lenders.
Director General of the Council of Mortgage Lenders, Paul Smee, said that the figures were fantastic news: “Across all measures, mortgage arrears and repossessions are continuing to improve. We continue to see some amplification of the downward trend in repossessions, which may bring into question our repossessions forecast for 2015 as a whole.
“This trend is very welcome. Low interest rates are acting as a significant support for homeowners in general, and are likely to be helping to stave off low level arrears for stretched households in particular.”
Why have the numbers dropped?
News that the number of houses being repossessed has dropped for the second quarter running could be a sign of a slowly recovering economy, and a sign that recent legislative changes could be helping.
Under new government rules that came into effect on April 2014, hopeful homeowners will now have to answer a series of questions from their lender regarding their income and expenses. Along with presenting copies of your bank statements and any savings you have, applicants will be asked detailed questions regarding how much they spend each month, for example, on an average weekly food shop and whether there are any fixed outgoings such as gym memberships or mobile phone contracts.
Although this no doubt adds to the stress of buying a home, particularly with some reports stating interviews can last up to 3 hours, it helps lenders build a better picture about whether or not an applicant is a suitable candidate for a mortgage. Despite the extra pressure, the measures were implemented in an attempt to prevent future repossession, a protective method for both banks and borrowers.
While the measures detailed above may have played a part in ensuring that people are able to keep up on their mortgage payments, one of the biggest influencing factors was the news that the Bank of England would keep interest rates at a record-low 0.5%. This will no doubt be providing a huge amount of support for borrowers up and down the country who may otherwise have been struggling to keep up with their monthly payments. While this news is fantastic at the moment, it still means that there is the ever looming prospect that interest rates will suddenly spike, and mortgage payments along with it.
For anyone who has ever taken out a mortgage and purchased a house, the prospect of repossession is certainly a worry. And although there is no way to predict what will happen in the future, there are ways to think ahead and make sure that you have a plan in place should something bad happen.
This piece of advice applies to both before and after the mortgage application process. As it currently stands, lenders and advisers will want to see details of your finances dating back 6 months, along with savings, and lenders will also perform the standard credit check. If you are applying, get your finances in order by paying off any debts or credit cards and making sure your bank accounts are healthy. Another useful hint - it might be worth reining in your online betting activity too, as this is something that has hindered many applicants. That way you are in good financial condition when the bank comes to consider your application, and can prove that you are responsible.
Once you are in the house, making sure you have savings to fall back on is key. Unexpected circumstances can strike at any time, whether it’s a broken kitchen appliance or an expensive car repair, and you need to make sure that the mortgage and bills can be taken care of. Having a little nest egg tucked away in a savings account that you add to each month and can dip into whenever disaster strikes will take an extraordinary amount of pressure off your shoulders.
Use a mortgage adviser
When it comes to purchasing a house, many people think they can do it alone. Whilst this is true to an extent, having a mortgage adviser to turn to, who can handle all of the paperwork and money aspects for you, is incredibly beneficial. In the very beginning they will examine your finances and advise on the type of mortgage and amount that you could borrow, and will be able to provide advice based on your individual situation.
Speak to the experts
Should you ever find yourself in trouble with your mortgage, the important thing is not to hide from it. There are numerous services out there such as the Citizens Advice Bureau and the government-run Money Advice Service who can help you get back on your feet. And although it may seem like the last thing you want to do, speak to your lender as soon as you encounter difficulties paying your mortgage. The decreased number of repossessions could suggest that lenders may be willing to be more flexible and open to working alongside homeowners who may find themselves struggling.
The news of interest rates remaining low, coupled with repossessions in the UK dropping even further, are both welcome pieces of news; signs that the housing market may be regaining some stability. On the other hand, this means that the interest rates could rise sharply rather quickly. If and when that occurs, it is essential that both homeowners and house-hunting hopefuls are prepared to adapt to the changes.