Some comebacks are less welcome than others and homeowners who remember the housing crash of the early 1990s will shiver at the news of a rise in repossessions.
Back in 1990 – the last time Liverpool were the champions of English football and the year Prime Minister Margaret Thatcher was on her way out – repossessions more than doubled before heading to a high of more than 63,000 in 1991.
Repossessions are back as the number of people losing their homes hits a six-year high. Last year saw a 65 per cent rise in the number of homes repossessed after their owners couldn’t keep up payments.
Experts are predicting another increase in the number of repossessions this year following the recent Bank of England interest rate rises. The cost of the average monthly mortgage has rocketed by around £500 a year following interest rates rises in August and November last year and again in January this year. Let MoneyExpert.com help you find a better mortgage deal!
It’s no surprise that homeowners are starting to sweat and that, according to the Council of Mortgage Lenders, around 17,000 homes were repossessed in 2006. The CML is predicting around 19,000 of us will have to hand keys back to mortgage companies this year.
That doesn’t mean we should all start panicking. The 17,000 repossessions are sad but still represent just 0.38 per cent of all mortgages in the UK. You have a one in 260 chance of getting repossessed. They’re not odds any of us would bet.
However, while repossession is the worst that can happen it can also be tough struggling with high monthly mortgage payments when you’re trying to make ends meet. MoneyExpert.com can show you how to boost your wealth and keep the roof over your head…
Feeling the strain
The Council of Mortgage Lenders is predicting a rise in the number of people who are behind on mortgage payments. Last year around 105,000 of us were at least three months in arrears on mortgages. This year the figure is expected to top 130,000.
Given the three interest rate rises since August 2006 and the fact that millions of us have had to borrow heavily to buy a house it is to be expected that the number of us in arrears is rising.
More interest rate rises from the current Bank of England rate of 5.25 per cent are expected this year so the pressure will mount on people who are already struggling with mortgage arrears.
Don’t bury your head in the sand
If you are struggling to keep up with mortgage payments then the first thing you should do is to contact your lender.
Mortgage companies aren’t keen to repossess as generally it can be a money loser for them. They will be happy to negotiate and may let you make reduced payments for a period until you are in a position to sort yourself out.
You should also try and reduce spending and particularly cut the debt repayments you are making. Many people in trouble with their mortgage will have other debts such as credit cards, store cards, overdrafts and personal loans.
It can make sense to consolidate all your debts in one place by taking out a consolidated loan. This means you borrow enough to clear your debts and then pay them off. This can help you by reducing monthly payments and giving you a plan to sort out your finances.
As a homeowner you can secure the loan against your house. It may be that rising house prices have boosted the value of your home enabling you to borrow more. See MoneyExpert.com’s homeowner loans service!
Don’t get into trouble in the first place
The best advice is not to get into trouble in the first place. And the best way to do that is to act now to cut your mortgage bill. If you are one of the millions paying a standard variable rate of 7.25 per cent you can save by switching to a better deal.
On a £150,000 mortgage at 7.25 per cent you’ll be paying around £1,096 a month. If you cut the rate to six per cent the payments drop to £977 – a saving of £119 a month of £1,428 a year.
You need to research the mortgage alternatives before making a move and bear in mind there may be costs involved in switching mortgages. Consider a fixed-rate mortgage as that will allow you to budget for two or three years safe in the knowledge that you know what you have to pay.
Whatever you do you need to research the market first. MoneyExpert.com will show you the range of alternatives out there.