Credit Crunch Bites UK Mortgage Payers as Risk of Repossession Soars
Housing-Market / UK Housing May 12, 2008 - 01:07 AM GMTBy: Nadeem_Walayat
The number of home owners at risk of repossession surged in the first quarter of 2008. Home owners served with county court claims jumped by 16% to 38,700. Home owners actually issued with eviction orders surged by 17% to 27,500. The Council of Mortgage Lenders (CML) upped their estimate for the number of repossessions for 2008 to 45,000. The Market Oracle forecast as of August 07 is for 70,000 repossessions this year, though the actual number will probably be around 60,000 as the CML repossession statistics tend to under report the true number of repossessions.
The surge in repossession orders is not surprising given that the UK housing bear market had completed its 7th month by the end of March. House prices went negative for April statistics, which will be a significant factor in escalating the number of repossessions during the rest of this year due to two factors-
a) The banks are more eager to go to the courts sooner rather than later as falling house prices increases the risks of greater eventual losses and less probability that the mortgage defaulter would stick to any agreement in the long-run as house prices continue to trend lower.
b) More home owners will be entering into negative equity and thereby are more willing to walk away from unserviceable mortgage debt that exceeds the value of their homes and less likely to to come to an arrangement that halts the repossession process that is more likely to happen when house prices are rising, therefore for this reason the Market Oracle forecast for repossessions remains substantially higher than the CML's.
The trend in UK house price deflation is on track with the Market Oracle forecast for a 15% decline from August 2007 to August 2009.
Affordability still remains at extremes, which is even more negative for the housing market as the UK sentiment towards property shifts from bullish to bearish, where housing is now increasingly no longer seen as a one way bet of year on year gains. The down-trend in unaffordability is inline with the Market Oracle forecast that is expected to continue into 2010 as a direct consequences of falling house prices, however this will still leave house prices far above the last low seen during the period 1995 to 2001 and therefore suggests further weakness beyond 2010.
If home owners are feeling a little depressed by all of the bad news then they can tune into tonight's BBC TV programme "The Truth about Property", which apparently paints a positive picture of near everything smelling of roses as a consequences of falling house prices. Maybe the presenter and the BBC researchers should catch a transatlantic flight to the US and see what the true consequences of sustained house price deflation are. As I pointed out some 8 months ago, the tendency is for the mainstream media and analysts on the payroll of the large mortgage banks to talk up the housing market, precisely as transpired during the early period of the 1990's housing bust - Media Lessons from 1989! .
We have already had other BBC property shows such as 'Homes Under the Hammer' showing re-runs of shows from the midst of the housing boom without any reference to the programming date and thus viewers fall under the impression that the shows are of more recent programming, rather than dating back as much as 3 years.!
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By Nadeem Walayat
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Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 120 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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