"But it doesn't mean people aren't struggling"
The number of homes being repossessed by money lenders has significantly decreased since the Bank of England (BoE) started raising interest rates at the end of 2021, House Buyer Bureau (HBB) has reported.
The property purchasing specialist’s latest market analysis revealed that the base rate increases have not yet resulted in a rise in the number of people having their homes repossessed. Instead, there has been a significant drop, bucking the expected trend that more and more people would lose their homes as mortgage payments go up.
In December 2021, the BoE started increasing interest rates to try and bring stability to the nation’s economy in the wake of the pandemic, a trend that has continued into 2022 as energy prices and the war in Ukraine continue to cause economic turbulence. The latest rate hike on Thursday pushed interest rates up by 0.50%, from 3% to 3.5%.
As a result of the central bank’s base rate increases, the number of monthly mortgage approvals in the UK has fallen by 19.2% since December 2021, as borrowing becomes more expensive and prospective homebuyers decide to postpone their ambitions until a more stable time.
Despite this, the impact on the housing market has not been entirely negative because, as HBB’s research showed, the consecutive rate increases have not resulted in more homes being repossessed.
HBB said that in the eight months preceding December 2021, there were 1,739 repossessions across England and Wales. The latest available data shows that in the months following the rates hikes, this number has fallen by 26.1% to 1,285 repossessions.
The biggest fall in repossessions has been reported in the East of England, where a total of 70 repossessions prior to the rate increases has dropped to just 19 – a 72.9% decrease.
In the South West, 114 repossessions in the eight months before the rates increase has fallen to just 73 in the months since – a drop of 36%, while in the North West, a total of 403 repossessions has dropped by 32.5% to just 272.
The fall in repossessions has also been significant in the North East (-30.8%), South East (-28.2%), London (-25.7%), and West Midlands (-22.7%), while the drop has been smaller in Yorkshire and Humber (-2%), Wales (-6.4%), and the East Midlands (-9.3%).
“Interest rate increases are never welcome news for homeowners with mortgages, so it’s going to be a relief for many to see that repossessions have not become more frequent as a result,” Chris Hodgkinson (pictured), managing director at House Buyer Bureau, commented.
“But this sharp decrease in repossessions doesn’t necessarily mean that homeowners are having no problem with fulfilling their mortgage. Instead, a key factor will be the fact that lenders are being advised to avoid rash repossessions in the case of payment shortfalls.
“They are, for example, being advised to allow homeowners to stay in possession of the property for a reasonable time to enable them to sell the property rather than have it taken away.
“So, while this drop in repossessions is preferable to a rise, it doesn’t necessarily mean that people aren’t struggling with payments, and we could well see a spike in repossessions over the coming months, as the patience of lenders wears thin when it comes to those unable to fulfil their repayment obligations.”
