Home repossessions hit 12-year high
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20 February 2009

LONDON (Reuters) - Forty thousand people lost their homes through repossession last year, the highest number since 1996 and analysts say the figures are only going to get worse as house prices slump and the recession takes its toll.

The Council of Mortgage Lenders said the number of home repossessions leapt by half in the three months to December compared with the same period in 2007 to 10,400, down slightly from 11,100 in the previous quarter.

That took the total for the year to 40,000, up from 25,900 in 2007 -- the highest in 12 years. While the level remains far below the peaks seen in the last recession of the early 1990s, the CML thinks 75,000 will lose their homes this year.

Analysts agree that the outlook is bleak.

"Unemployment is set to reach double digit rates as the recession runs its course," said Ed Stansfield, a property economist at Capital Economics.

"In short, mortgage possessions remain on course to match, or possibly exceed, their previous peak of 75,500 seen in 1991."

Currently, the proportion of repossessions to the total number of mortgages is still well under that seen in the recession of the early 1990s.

The CML said repossessions in 2008 constituted 0.34 percent of all existing loans, compared with the series peak of 0.77 percent in 1991.


Figures from the Ministry of Justice showed court orders for mortgage repossession in England and Wales rose 14 percent on the year to a seasonally adjusted 29,095 in the final quarter of 2008, but were broadly the same as the third quarter.

The data show the difficulty many homeowners were facing in coping with the cost of their mortgages as the economy entered recession at the end of last year.

The Labour government has introduced measures to try to reduce the number of repossessions, or at least to make court action a last resort.

The Ministry of Justice said that had had some impact on the number of repossession claims in court, but Stansfield said it was too soon to judge whether this initiative would have a permanent dampening impact on repossession claims.

The economy shrank 1.5 percent in the three months to December -- the sharpest rate of decline since 1980 -- and the International Monetary Fund expects it to be the hardest hit among the world's biggest economies this year.

With house prices falling sharply, more and more property owners are finding themselves in negative equity -- when the value of their home is worth less than its remaining mortgage.

"Corporate failures, mortgage repossessions and individual bankruptcies all seem set to rise substantially through 2009," said Howard Archer, an economist at Global Insight.

"Deep economic contraction, sharply rising unemployment, high debt levels, substantially lower equity and house prices, and more and more people being trapped in negative equity will exact an increasing toll on individuals over the coming months."

The number of company winding up petitions issued by courts in England and Wales rose 18 percent on the year in the final quarter of 2008 to 3,382, the Ministry of Justice said.