Mortgage repossessions have leap to its highest level in 5 years with a 65% increase in 2006.
More than 17000 houses were awarded in the UK last year, and this figure is expected to increase to 19000 in 2007. However, while this is a very worrying time for those facing the recovery, by historical standards repossessions UK are still below the 10-year average.
Already in 1991 repossessions totaled 76000, more than four times higher than current levels. The housing market back in early 1990 was different in two important respects:
1) In 1991, the economy has just emerged from a period of 15% mortgage interest rates that were very unfordable reimbursements. In 2007, although we have had a series of increases in interest rates in 2006, interest rates are still at comparatively low levels.
2) housing prices are declining in 1991, which led to many falling into the trap of negative equity - where people are unable to sell his house to get out of trouble.
Since 1991, there has been an opposite effect, with low interest rates and a booming housing market by making it easier for homeowners to afford mortgage payments and / or sell their house if they fell into crisis.
However, when we were reaching the end of the boom in the housing market and interest rates begin to slip, it is inevitable that once again the homeowners begin to struggle to continue payments.
The effects of higher interest rates take time to filter through because many home owners have taken out fixed rate mortgages which insulates against tariff increases. Fixed rates usually last for 2 years, so that carried out a fixed rate mortgage in 2005 need to ensure that those who can afford the inevitable increase in reimbursements to stop the threat of repossession.
At the same time, there has been a substantial increase in the number of interest only mortgages outside, and reimbursements from the interests of only mortgages are more volatile when interest rates change. Therefore, although the houses have become increasingly affordable due to the release of loans, which have stretched over themselves-may be running into trouble with repayments.
What is worrying is that repossessions have risen in 2007 before interest rate increases had time to take effect. This suggests that a larger number of repossessions are being fed by personal debt rather than changing market conditions.
For those who are in financial difficulties and do not want to resort to bankruptcy or having a VAT, there are a number of property companies that will buy your house and rent it back to you at an affordable price. This allows you to quickly release the equity in your home, settle its debts and stop repossession before it is too late.
UK House Repossession News