Buy-to-let landlords hit hard by recession
Number unable to keep up with their mortgage payments doubles to 27,000
By James Daley, Personal Finance Editor
Saturday, 21 February 2009
The number of buy-to-let landlords unable to keep up payments on their
mortgages more than doubled during the second half of last year, hitting
record highs of almost 27,000.
Meanwhile, the number of repossessions of privately owned homes also
leapt – finishing the year up more than 55 per cent on 2007 at 40,000.
The figures, published by the Council of Mortgage Lenders (CML)
yesterday, are the latest indication of the extent of the collapse in
the UK economy during the second half of last year, as unemployment
rose, house prices slumped and GDP growth moved into negative territory.
The buy-to-let sector has been the hardest hit over the past year. The
number of landlords who are three months or more behind on their
mortgage payments rose by 257 per cent between the end of 2007 and the
end of 2008, as landlords failed to secure the rents they needed to meet
their loan payments. New lending in the buy-to-let sector has also
plummeted, falling by 56 per cent in the final quarter of last year.
Although repossessions of private homes increased during the second half
of the year, the rise was not as fast as some had feared.
The Government introduced new rules towards the end of 2008, pressuring
lenders to give borrowers more time if they couldn’t keep up mortgage
payments. This is believed to have helped keep the number of
repossessions down, although the Government’s Homeowner Mortgage Support
Scheme – which was also announced last year, has yet to be put into
place. It is expected to open in April.
Economists and politicians claim that the Government needs to do more if
it is to stem the rise in repossessions. “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,” said Howard Archer, chief UK economist at the
consultants Global Insight.
“While the substantial cuts in interest rates by the Bank of England
will obviously help some people, they are likely to be insufficient to
save many from insolvency and losing their houses. Government measures
to help homeowners in trouble are also likely to have only a limited
impact,” he said. “The many people who had to stretch themselves to the
absolute limit to get into the housing market in recent years are
particularly vulnerable. The more that house prices fall, the more
people will be trapped with negative equity.”
In the private housing market, the statistics showed a jump in the
number of voluntary possessions – where owners simply hand over their
keys to the mortgage company. The number of such voluntary possessions
rose 65 per cent to 4,630.
But the CML director general, Michael Coogan, urged borrowers to contact
their lender and ask for support, rather than giving up once they run
into troubles. “Borrowers are still liable for their debt, even if they
leave the property, so working through their problems is much more
likely to be in their best interests,” he said. “We know the plethora of
schemes and initiatives is daunting, and we are working closely with
government and advice agencies to try to simplify the information
available, and ensure that those borrowers who may qualify for help get
access to the information and advice that they need at the right time.”
The Liberal Democrats blamed the Government for the rise in
repossessions, accusing Gordon Brown of “sitting on his hands”. “The
much- publicised Homeowner Mortgage Support Scheme announced last year
has not yet helped a single family in trouble,” said Nick Clegg, the
leader. “The Prime Minister’s wasteful complacency means that millions
of extra families could be added to already full social housing lists.
“If the Government was serious about stemming the tide of repossessions,
it would give courts the power to ensure repossession is the absolute
last resort and remove the barriers to allow councils to invest in
social housing.”
What to do if you can’t meet your payments
Talk to your lender
The Government has been putting pressure on banks and building societies
to go easy on borrowers who are struggling – and the bank is more likely
to give you a break if you call them as soon as you know you are going
to miss a payment. Try not to wait until after the event. Ask your
lender to let you have a month or two off your payments, or to make
smaller payments. They’re more likely to say yes if you can convince
them that a break will help you get back on track.
Seek advice
Charities such as the Consumer Credit Counselling Service
(www.cccs.org.
provide free advice for people struggling with their loan payments. If
you haven’t managed to persuade your lender to reduce your payments, or
to give you a break, organisations such as the CCCS can talk to your
lender on your behalf. They can also help you put a more manageable
payment plan together for all your loans – to help you get back on a
stable financial footing.
Http://www.independ
hard-by-recession-
Saturday, 21 February 2009
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