Two sets of recently published figures, published by the Council of Mortgage Lenders and the Ministry of Justice, on repossessions give a fascinating insight to the way the property market is functioning at the moment.
The figures on repossessions of both owner-occupied, buy to let and rented properties show interesting moves over the past 12 months, with a real divide between the mortgage sector and the landlord/tenant sector.
Council of Mortgage Lenders data
Firstly, the Council of Mortgage Lenders has published their annual figures on repossessions for 2014. The most notable headline figure is that the number of repossessions fell to 21,000 in 2014. That compares to a figure of 28,900 in 2013. That is a drop of 26% on the previous year and, in fact, is the lowest number since 2006.
In addition, this represents a repossession rate of 0.19% (or less than 2 in 1,000) which is also not only lower than 2013 but also again represents a figure that is lower than at any time since 2006.
When these figures are broken down to separate out repossessions on owner-occupied properties and repossessions of buy to let properties, it becomes apparent that out of those 21,000 repossessions, 16,100 were on owner-occupied properties, and 4,900 were on buy-to-let properties.
The repossession rate on buy-to-let mortgages was slightly higher than on owner-occupier loans, despite the fact that the average level of arrears outstanding on buy-to-let repossessions was lower than the average amount outstanding on a home-owner loan repossession.
Fewer mortgage arrears
Other headline figures published at the same time showed that at present, fewer people are in arrears with their mortgages than has been the case for some period of time. In only approximately 1% of mortgages are there arrears amounting to more than 2.5% of the amount loaned, a drop of around 20% on the previous year. This is clearly good news.
What do these figures tell us?
Firstly, one should probably give credit to the mortgage lenders for offering considerable good will and forbearance to many genuinely hard-pressed owner-occupiers by helping them get through periods of financial difficulty without losing their home. All too often it is easy to portray mortgage lenders as the big bad wolf who force people out of their homes at the drop of a hat but these figures will probably help to rebalance that view somewhat.
Secondly, however, one should probably sound a note of caution. We are certainly not out of the woods yet when it comes to having a steady and stable property market. Whilst only around 1% of mortgages may be considered in arrears that is still a total of approximately 116,800 loans – of which circa 24,700 were in arrears by a sum of more than 10% of the amount borrowed. Lenders’ patience does have a limit. And clearly a sudden increase in interest rates or unemployment levels could see a sudden surge in arrears and repossession rates.
Ministry of Justice data
Moving on to the Ministry of Justice figures, their latest statistics publication for the October – December 2014 quarter gives annual figures for the year that cover not only mortgage repossessions through the county courts, but also landlord and tenant repossessions, and it is the latter on which I would like to focus.
Landlord repossessions increase
Here we see a different picture emerging. The annual total of claims issued in 2014 for repossession of rented residential premises was 161,300. This is 5% down on the previous year. However the numbers of court orders made, the number of warrants issued and the number of repossessions actually carried out in 2014 have all increased since 2013.
Indeed, for repossessions of rented residential premises, the figure for 2014 was in the region of 42,000. This is the highest figure recorded since the MoJ started collating such figures in 2000 and an increase of 11% on the figure for 2013.
Why is the rented sector heading in the opposite direction?
Why the divergence? Why are figures for repossession in the rented sector heading in completely the opposite direction to those in the mortgage sector? The answer is probably obvious.
Private landlords cannot afford to have tenants in place who are not paying their rent. Their costs, especially in buy-to-let properties where there is still an underlying mortgage being paid off by the landlord, do not go away just because the tenant is not paying their rent, and as we have seen from the CML figures, mortgage lenders are rather less tolerant of buy-to-let borrowers going into arrears than they are owner-occupiers.
When their tenants go into arrears, they need to act quickly if there is little evidence to show that the tenant is going to be able to get things back on track quickly.
Quick, decisive action is essential – getting that court order is essential. Getting your former tenant out so that you can get new paying tenants in is a priority. The question then becomes who do you get to enforce it? Do you wait for the county court bailiffs to get round to doing it – or come and see a specialist High Court enforcement company such as ourselves for advice as to how we can help you?
David is an authorised High Court Enforcement Officer and our Director of Corporate Governance