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Credit Crunch Bites UK Mortgage Payers as Risk of Repossession Soars

Housing-Market / UK Housing May 12, 2008 - 01:07 AM GMT

By: Nadeem_Walayat

Housing-Market Best Financial Markets Analysis ArticleThe 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.!

For regular analysis on the housing bear market and credit crisis subscribe to our Free Weekly News Letter

More Analysis on the UK Housing Market:

08 May 2008 - UK House Prices Tumbling- Interest Rate Conundrum
21 Apr 2008 - Bank of England Throws £50 billion of Tax Payers Money at the Banks
17 Apr 2008 - Credit Crisis SCOOP- LIBOR Is Now Irrelevant to Derivatives Pricing
08 Apr 2008 - UK House Prices Plunge Over the Cliff
01 Apr 2008 - How to Fix the Credit Markets
11 Mar 2008 - RICS Data Confirms UK Housing Market Heading for 1990's Style Crash
03 Mar 2008 - Credit Crisis Morphs Into Stagflation- Protect Your Wealth!
26 Feb 2008 - UK House Prices Fall for 5 Months in a Row- Housing Market Will Go Negative April 08
07 Feb 2008 - UK Interest Rates Cut to 5.25% - Will Not Help the Housing Market
21 Dec 2007 - UK Commercial Properties Crash Looms as Property Investment Fund Frozen
07 Dec 2007 - Analysis of Interbank and Base Interest Rate Spread
05 Dec 2007 - UK Home Owners Unable to Refinance Mortgages As Fixed Rates Expire During 2008
02 Dec 2007 - UK Housing Slump Gains Momentum as Properties Fail to Sell at Auction
10th Nov 2007 - Crash in UK House Prices Forecast for April 2008 As Buy to Let Investors Sell on Capital Gains Tax Change
28th Oct 07 - UK House Prices - Primary Reasons For a Sharp Fall
25th Sep 07 - UK Housing Market on Brink of Price Crash - Media Lessons from 1989!
22nd Aug 07 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth
1st May 07 - UK Housing Market Heading for a Property Crash

 

By Nadeem Walayat

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

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

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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Comments

Linder
13 May 08, 03:55
BBC old programme

I don't know what others feel when they see the old property programmes - I am switched off as they makes me feel depressed. The BBC & others should stop showing these old programmes. It's time for the BBC and others to update their property programmes to reflect the current reality. I have been reading articles from this website for the last 6 months and enjoy reading as they have some logical explanations and have been pretty close to reality. It would benefit others if they are shown to a wider audience - perhaps major newspapers should display these articles too!


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