The global credit crunch is upon us pushing the world economy into a depression so severe the worlds governments have had to step in to stabilise the money markets. Furthermore with experts predicting that the financial hangover will last well into the New Year, what exactly is the impact of this on homeowners and their properties?
House prices are collapsing, meaning that approximately 60,000 homeowners a month are being forced into a negative equity situation. Should this trend continue it means that 2million households will enter negative equity by 2010. New Research from Standard & Poor’s ratings agency has indicated that the banks are much more aggressive in seizing homes when mortgage payments have been missed. It is all further evidence of the financial crisis, and how it is affecting people, especially homeowners who are now unable to move because the value of their home is less than their outstanding mortgage. Repossessions have soared to 19,000 in the first half of the year, up a massive 40& on the previous six months. This figure is estimated to rise to 26,000 in the second half of 2008.*(The Sunday Times)
Last night opposition politicians blamed Labour for encouraging a “culture of indebtedness” that now threatens to cause an implosion in the housing market. Philip Hammond, the shadow Treasury chief secretary, said: “We are now paying the price for a decade of debt-fuelled boom, with hundreds of thousands of people unable to sell their property, after being encouraged by the government to overstretch themselves to get on the property ladder.” Vince Cable, the Liberal Democrat finance spokesman, urged Gordon Brown to do more to prevent unnecessary repossessions. “It genuinely must be a lender’s last resort, which right now it certainly is not,” he said.*
Indeed Northern Rock, the now newly nationalised bank is said to be behind a wave of repossessions, making more than 2,000 seizures in the last nine months.
Esther Spick, from Surrey, is three months in arrears on her Northern Rock mortgage. The lender has launched repossession proceedings, even though she owes just £1,200. In one case reported to The Sunday Times by a housing charity, the bank is trying to seize a home where the owner is just £800 in arrears, even though he has about £40,000 of equity in the £180,000 property.*. This has led several of the leading debt charities to comment that they banks are behaving unreasonably and with a large amount of inflexibility.
Adam Sampson, chief executive of Shelter, the housing charity, said: “Northern Rock is behaving very aggressively on repossessions, but it is not the only lender acting like that.”*
To make matters worse, there are actually no industry guidelines for how ‘much’ in arrears a homeowner must be before repossessions proceedings can be issued. The government has said that they will bring forward laws to clarify this area, forcing lenders to offer alternative payments schemes before issuing repossession proceedings.
Of course all the above is not encouraging for those homeowners who wish to use the equity in their home to remortgage or to source a homeowner loan. However it does not mean that it is not possible. There are lenders out there that are willing to lend, and JSTFinancial.co.uk have access to all of them. Borrowing is all about risk, and although a lot of the mainstream lenders have had to reassess their own in house criteria, a lot of the smaller lenders have not changed theirs. Complete the short form now and let JST Financial help source you the best deal.
*Source The Sunday Times