London (Parliament Politics Magazine) – The number of assertions made by banks and landlords to repossess houses in England and Wales has attained the highest level in five years as households stumble with higher borrowing costs.
How Have Mortgage Possession Claims Changed Over the Past Years?
Stats from the Ministry of Justice reveal mortgage possession claims made by lenders in the county courts contacted 5,343 in the three months to the end of June, up 34% from a year before, to hit the most elevated level since the first quarter of 2019.
Why Have Landlord Possession Claims Increased by 9%?
Landlord possession claims also rose by 9% year on year to 24,495 – among the most elevated levels since 2019 – as private and social residents struggled to keep up with spending the rent.
Possession claims appear when lenders or landlords take homeowners or tenants to tribunals to try to repossess their houses. While claims have enhanced recently, they remain below pre-Covid levels, despite the Bank of England’s most difficult cycle of interest rate gains in decades.
How Are Rising Mortgage Repayments Affecting Living Standards?
Underscoring the impact of tougher mortgage regulations introduced after the 2008 financial crisis, possession claims also remain quite lower than a peak of 26,419 registered in the second quarter of 2009. Millions of mortgage borrowers have encountered a big peak in repayments after 14 consecutive Bank of England rate rises in response to the highest levels of inflation since the early 1980s. Threadneedle Street last week slashed interest rates for the first time since the Covid pandemic, from 5.25% to 5%. The Bank had steadily grown its key base rate from 0.1% in December 2021.
Inflation has dropped back to the Bank’s 2% target, from a height of 11.1% in October 2022.
Regulators raised guidance to bypass possession proceedings during the height of the pandemic, while the UK’s biggest banks decided last year to offer 12-month grace periods to allow struggling mortgage holders amid the cost of living crisis.
While mortgage possessions remain historically lower, borrowers have encountered billions of pounds in additional mortgage repayments, shooting living standards and tipping the UK economy into recession last year as families cut back on other spending.
Still, many households meet the rising risk of losing their houses. The latest figures reveal London had the most elevated rate of claims for mortgage and private landlord guardianship; Newham, in the east of the capital, is in the top 10 for both classifications. Separate government figures indicate that statutory homelessness reviews in England increased to 94,560 in the first three months of 2024, up 10.8% corresponded with the first quarter of last year.
Aza Teeuwen, portfolio manager at TwentyFour Income Fund, stated: “As expected, arrears are slowly increasing, but the actual repossessions are still very low compared to historical standards, which is mostly the result of active servicing done by the banks who are now, more than historically, working with their borrowers to bring them back on track.”