The Housing crash which plagued so many peoples lives back in the 1990s and a decade ago in 2008 set a chain of events of which caused a lot of homeowners to get repossessed, experts are warning that this is set to return.
We believe a combination of financial situations and commitments are going to push homeowners towards the brink, they might be unable to meet mortgage repayments.
There are a number of reasons which are partly to blame but the primary reason is key state benefit changes, also with interest rate rises and the slowing of our economy caused by the threat of Brexit has lead to potential job losses. The combination of all of these assurances has raised the unwelcome consequence of mass repossessions.
During the last five years, the number of repossessions has fallen, this is due to the record low-interest rates. Banks are worried that the trend is set to reverse before the end of the year.
The reason behind the belief that a surge of repossessions are looming, is because of a rise in state benefit support for mortgage interest to a loan have been handed out.
Thousands of mortgage borrowers that are in areas have been helped by this benefit, its to help them not accumulating arrears on their mortgage and in the long run losing their home. Its available for people on income-related employment and government allowances also pension credit. This benefit paid the interest of the loan directly to the mortgage company.
For people on pension credit there was no wait to receive this help but for people claiming unemployment benefit, there was a waiting period of 39 weeks.
The change which came into effect in April of this year means that the claimant can still receive the support and the cash will be paid directly to the lender still. It’s now treated as a loan and this will accrue interest of 1.7% the borrower must pay the loan back either by selling the property or on their death.
The help which the government are offering is based on standard rate mortgage interest set at 2.61%, even if the homeowner is on a higher rate home loan. Figures show only one-fifth of people who are eligible of which is 105,000 have taken up the offer for support.
This seems to ourselves a disappointing conversion rate to go ahead with the mortgage support scheme.
TheDWP ( Department for Work and Pensions) advised that only two thousand of these homeowners are at risk of repossession, but surely all of those who have not signed up to the scheme are at risk.
This equates to around 60,000 people who have declined to sign up to the scheme, some will have opted for outside help from family members, friends etc and others you can imagine have just simply buried their heads in the sand.
We feel 60,000 people who have declined this help will feed the official arrears figures which in turn leads to repossessions.
A leading expert in Economics has suggested a repossession surge is blown out of all proportion, he explains that there’s healthy employment within the UK along with wage growth. A large number of homeowners are on fixed-rate mortgages which are set on low-interest rates so there is no reason to worry. He also says most people who are struggling to pay their mortgage will cut back from elsewhere to make sure they meet that payment.
Our main concern is for elderly borrowers on fixed incomes, they are at the greatest risk of getting repossessed. For people in genuine trouble, the government scheme is a no-brainer.
In 2017 there were 140 mortgage borrowers lost their homes every week because they struggled to keep up with mortgage payments. Compared to 1991 this figure is a drop in the ocean, back then the figure was ten times that number and equated to 75,000 over the year. During the 2009 financial crisis, this figure at its very hight was 940 people per week losing their homes.
During the 90s if a borrower defaulted on their mortgage repossession would be their first port of call, whereas now it’s their last resort. Borrowers which fall behind on mortgage payments can ask for a payment holiday or ask for their mortgage term to be extended and arrears to be added to their loan.
The DWP said “It’s a good job there is a safety net in place for borrowers falling behind on their mortgage payments, with the help of the government interest payment scheme”
In regards to claimants who turned down the scheme, the government have confirmed that they can reapply and if successful their payments can be backdated.
There are a few insurance policies that can protect you against financial hardship.
Critical Illness Cover: It costs roughly around £45 per month to repay a £150,000 mortgage which is decreasing over 25 years. They will pay the lump sum on a diagnosis of a serious illness.
Mortgage Payment Protection: This protection will cover your mortgage repayment for up to 2 years after the loss of a job or illness. Prices start from around £10 per month and will pay a maximum of £2000 a month or 65% of your monthly income whichever one is lower.
Replace Income Cover: To cover your earnings of £1500 per month your payments will be around £25 pcm. This covers your income up to the age of 65.