10 November 2022
If you are covering the latest government mortgage possession statistics, the 95% mortgage guarantee scheme data or the Help to Buy Equity Loan and ISA scheme data, please see the following comment from Karen Noye, mortgage expert at Quilter:
Mortgage possession statistics
“Mortgage possession actions i.e., the process of a lender repossessing someone’s home due to missed payments has started to increase at a significant rate although levels still remain below pre-covid levels.
“Compared to the same quarter in 2021, mortgage possession claims increased from 2,832 to 3,680 (30%), orders from 1,229 to 2,491 (103%), warrants from 947 to 2,437 (157%) and repossessions by county court bailiffs increased from 390 to 744 (91%).
“A claim, order, warrant and repossessions by country court bailiffs are all steps in the process which concludes with a home being repossessed.
“In the face of the pandemic, the FCA put a stop to all repossession proceedings from March to September 2020 during which time no repossessions took place. After that the FCA advised mortgage lenders not to commence or continue possession proceedings until April 2021 (unless there were special circumstances). As a result, there were only 10 repossessions from April 2020 to March 2021 (Q2 2020 to Q1 2021), and 744 in July to September 2022, up 91% compared to the same quarter in 2021.
“Repossessions spiked after the financial crisis but since then due to lenders taking a more proactive approach to helping struggling borrowers and also low interest rates the levels of repossessions have dramatically decreased.
“However, in the face of the cost-of-living crisis sadly the numbers of repossessions is starting to climb again. Historically, periods of high interest rates has coincided with an uptick in the number of repossessions due to people’s monthly payments increasing to levels they can no longer pay. With high energy and food prices some people will start to struggle to heat their homes, eat and service their mortgage and this will lead to repossession.
Three tips if you are struggling with your mortgage bills:
Don’t bury your head in the sand
"Lenders will normally write to you within 15 days of a missed payment but if you are struggling with your bill, it is crucial that you talk to your lender before they contact you. Burying your head in the sand will only make things worse. Mortgage debt is what is described as a priority debt and as the name implies should be prioritised above most other types of debt you have.
Work out what you can afford to pay back
"Before picking up the phone to your lender take some time to work out exactly how much you can afford to pay back each month. There are budgeting tools available online or you could speak to a debt charity or Citizens Advice. If you have sought help, do let your lender know as showing that you have looked at ways of paying back your debt shows your serious about it and can help avoid repossession orders down the line.
Discuss ways of making payments
"Lenders have a duty to act fairly with customers who are having difficulties and having a frank conversation with your lender can help them find a way for you to avoid the problem spiralling out of control. Lenders might be able to put you on a payment plan based on what you can afford to pay back and this could mean extending your mortgage term or if your home is worth more than the mortgage, you might be able to add your arrears to the total amount you owe and pay it back over the lifetime of the mortgage. Seeking advice before opting for any plan is worthwhile as some plans may end up with you paying much more interest over the lifetime of your mortgage."
Data on 95% mortgage guarantee scheme
“First-time buyers have faced a difficult battle in recent years, from soaring house prices, inflation rapidly eating away at their deposits, and the current cost of living crisis putting a dampener on their ability to save – all in conjunction with growing mortgage rates that make monthly repayments increasingly unaffordable.
“Given the struggle first time buyers face, it is rather surprising that the number of mortgages completed with the help of the government’s mortgage guarantee scheme remains relatively low – with just 24,153 mortgages completed between April 2021 and June 2022.
“While use of the scheme is relatively low, it is seeing a gradual uptick in popularity. In its first full year – April 2021 to March 2022 – a total of 17,996 mortgages were completed with the support of the scheme. In comparison, in just the first three months of its second year – April to June 2022 – a total of 6,157 were completed. However, while the take up has been modest at best so far, this is partly as a result of lenders identifying the gap in the market prior to the government’s implementation of the scheme and therefore offering their own 95% mortgage products. Given lenders are now tightening their offerings and many have reduced or removed the high loan to value mortgages they offer, we could see a further uptick in the use of the government scheme as more people are forced to rely on it.
“The latest data shows 15% of all mortgages completed using the government scheme were not first-time buyers, showing the scheme is still proving relatively popular among other borrowers. This may illustrate that it is not just first-time buyers who are struggling with the current housing costs and other financial pressures, and this could increase as the cost-of-living crisis takes a firmer hold.
“Interest rates have risen rapidly, and people’s finances are beginning to look less stable against the cost-of-living backdrop. As such, lenders may begin to take more advantage of the scheme which would compensate participating mortgage lenders for a portion of net losses suffered in the event of a repossession. The guarantee applies to 80% of the purchase value of the guaranteed property covering 95% of these net losses.”
Data on Help to Buy schemes
“This morning’s Help to Buy ISA statistics show that since its inception, the scheme has supported 514,868 property completions – up 16,928 on the previous quarter. The Help to Buy Equity Loan scheme statistics on the other hand, show that the scheme has supported 369,104 property completions since its 2013 inception, 8,018 of which completed between 1 April and 30 June 2022 – down 26% compared to the same period in 2021.
“The majority of home buyers using the Help to Buy ISA scheme are aged between 18 and 34, with 65.1% aged between 25 to 34. The median age for a first-time buyer using the scheme remains at 28, two years younger than the average first-time buyer age across the market of 30. While the schemes are well meaning, the figures reiterate just how few first-time buyers are actually supported by them. House prices have grown rapidly over the past couple of years, yet the mean value of a Help to Buy ISA purchase price is just £176,456 compared to an average first-time buyer house price of £246,776 and a national average house price of £295,903.
“The latest Bank of England interest rate hike will only have served to worsen the position of first-time buyers. Cheap mortgage rates have become a thing of the past, and first-time buyers will now struggle all the more to take their first step onto the housing ladder as they are further priced out of the market.
“The Help to Buy ISA has been closed to new accounts for some time now, and the Help to Buy Equity Loan scheme closed to new applicants on 31 October. Ultimately, the government needs to plough its energy into building more housing stock as opposed to opening any more schemes as this will truly get to the root of the issue.”
