House repossessions rise 15% in three months amid high mortgage rates

Home repossessions rose 15 percent between July and September this year compared to the three months before, as mortgage rates rose and the cost of living crisis put pressure on household budgets.

In the third quarter of 2022, according to data from UK Finance, a total of 700 properties with mortgages were taken over.

But it wasn’t just owner-occupied homes that saw a rise in repossessions. The number of owner-occupied homes also rose by 11 percent from July to September to 390.

Home ownership or repossession is the process of a lender taking ownership of someone’s home because of missed mortgage payments.

Although the number of seizures is on the rise, it is currently still below pre-Covid levels.

Mortgage rates for both residential and buy-to-let loans rose significantly over the year, which could have contributed to homeowners being unable to meet their monthly payments.

On May 1, the average two-year fixed interest rate among homeowners was 2.57 percent, and on October 1, it was 5.43 percent.

On a £200,000 mortgage, the increase increases monthly payments by £316 from £904 to £1,220.

While fixed-rate homeowners are protected until their fixed term ends, this means that payments can rise significantly when they re-mortgage.

Those with tracker mortgages and standard variable rates will likely have seen their payments rise this year as well.

UK Finance figures show home ownership rising again after Covid-19

Citizens Advice research has found that more than a quarter of mortgage holders would not be able to pay their monthly repayments if they increased by £100 a month.

Samuel Mather-Holgate, financial advisor at Mather and Murray Financial said: ‘If mortgage rates continue to rise, we will inevitably see an increase in foreclosures as the current situation is a perfect storm.

“Increased borrowing rates are accompanied by dazzling utility bills and general inflation affecting the cost of basic necessities such as food and clothing.

“Maybe there have been more stress tests on affordability for mortgage borrowers, but they assumed everything else was equal, which isn’t the case.”

However, the number of delinquent homeowners’ mortgages fell 1 percent in the third quarter to 74,440.

Within the total, there were 28,910 homeowners’ mortgages with arrears of 10 percent or more of the outstanding balance.

This was the same number as the previous quarter.

Seizure peaks coincide with higher rates

Wealth manager Quilter also analyzed repossession data, noting that the number of mortgage receivables rose 30 percent between July and September compared to the same quarter in 2021, from 2,832 to 3,680.

It said the number of possession warrants issued rose more than 100 percent from 1,229 to 2,491. This is the legal document that informs a homeowner that their lender can take possession of a property.

Warrants are up 157 percent from 947 to 2,437 and bailiffs’ repossessions are up 91 percent from 390 to 744.

Commenting on the numbers, Karen Noye, mortgage expert at Quilter, said: “A claim, warrant, warrant and bailiffs’ repossessions are all steps in the process that culminates in a house being repossessed.

“Repossessions boomed after the financial crisis, but with lenders taking a more proactive approach to helping struggling borrowers, as well as low interest rates, repossessions have fallen dramatically.

“Unfortunately, in light of the cost of living crisis, the number of repossessions is starting to rise again. Historically, periods of high interest rates have coincided with a rise in repossessions as people’s monthly payments soared to levels they can no longer afford.

“With high energy and food prices, some people will find it difficult to heat their homes, eat and pay off their mortgages and this will lead to repossession.”

Noye notes that the surge in holdings from last year may be due to the FCA’s actions during the pandemic to limit holdings.

The FCA has suspended all repossession proceedings from March to September 2020. Thereafter, the FCA advised mortgage lenders not to initiate or continue holding proceedings until April 2021, unless there were special circumstances.

As a result, there were only 10 seizures from April 2020 to March 2021.