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Repossessions Might Be Down, But That's Scant Comfort for Anyone Facing the Loss of Their Home

Posted: 10/11/2012 00:00

Good news (finally) from the housing market where a couple of new surveys have provided a smidgeon of cautious hope for owners.

Firstly, property prices are falling at the lowest rate for two years. That's right. Prices. Are. Falling. At. The. Lowest. Rate. For. Two. Years.

So, er, they're still going down. Just a little less quickly than previously!

In honesty, it's unlikely many homeowners will be cracking open the champagne, although the survey by Hometrack does suggest prices in the north, where there has been the most sustained decline, are finally stabilizing - so it's good news in the post for cities like Sheffield, Manchester and Leeds.

Secondly, and perhaps more significantly, according to the Council of Mortgage Lenders (CML) the number of repossessions has fallen to its lowest level for five years.

Once again, this should be treated with cautious optimism rather than a full-blown 'break out the Bollinger' celebration with bunting and flags.

This year so far, says the CML, there have been 26,300 repossessions.

That is an eight per cent drop on the same period a year ago, but it's still 26,300 shattered dreams and individual tragedies, and I've no doubt the stories behind each and every one of these repos would make sobering reading.

Were I a cynic, I'd suggest the banks are being more flexible - and less prone to repossess when things get sticky - because they're not necessarily going to get great re-sale value back from reclaimed homes in the current market (see point one).

With the economy still floundering, it's important anyone with a mortgage understands the implications of repossession. They do not just happen to other people.

I've heard lots of stories of individuals and couples with high incomes who splurged on a big mortgages during the good times, and are now facing real hardship after a job loss, divorce or the like.

The important thing for anyone facing the possibility of losing their home to remember is that there are options. When you start getting into trouble, the natural thing is to bury your head in the sand. That's the worst thing in the world you can do.

If you can face up to it, you'd be amazed at the amount of support out there.

From free debt advice via charities and government agencies, to companies who can help you manage your financial obligations better, there are many genuine sources of help.

And, realistically, it's a pain in the neck for mortgage lenders to repossess.

For starters, your lender might agree to a mortgage holiday, where you stop paying for up to a year while you get your finances in order. Or accept a vastly reduced payment in lieu of nothing at all.

You'll need to come up with a viable business plan. The banks are not your friends, but they should listen. If your usual monthly payment is £500, but you can only afford £50, you might be surprised when they accept.

It is vital you're realistic though. Whatever you do, don't promise to pay something you simply cannot afford.

If a lender does start getting heavy, you do have a fair amount of rights. They can't just come and take your property away.

There are companies that will help by buying your house off you short-term or negotiating deals directly with mortgage lenders. If often pays to go through somebody who can talk the bank's language and play a bit of hardball.

Some lenders will take advantage of the weak, and won't pressure the strong. But remember, there are good debt management companies and bad ones - and there will be charges for both kinds - but they really can help take a weight off your mind.

Otherwise, in the short-term, could you borrow money from a family member or friend at a reasonable rate? Or could you take in a lodger who will also help with bills?

How about moving into smaller rented accommodation - or in with mum and dad or family friends - and then renting your house to cover repayments?

Rentals are strong at the moment and the amount of rent might exceed your mortgage comfortably. You might not be living in your house, but at least you're still paying the mortgage. Check with your lender though - they may not allow renting. But a new deal might be agreed, and it might just stop you defaulting.

It might be an obvious point, but unless you're deep in negative equity, you don't want your house to be repossessed and sold in what's call a 'fire sale'. The price is cheap by nature of the urgency.

It's a horrible thought, but you might want to consider proactively selling - taking control of the sale, rather than letting someone else do it. If you are in crisis, you need to take dramatic action and it's often better that you do it yourself.

Finally, it's important to understand the difference between secured debt (a mortgage) and unsecured debt (a credit card or furniture loan for example).

The last thing you should stop paying is secured debt. So if you're struggling to meet payments, don't miss your mortgage when you're still paying off an unsecured loan or credit card.

Overall, whatever the reasons, it's great to hear fewer homes are being repossessed. But that's scant comfort if you're affected personally. Losing a home can be right up their with death, divorce and joblessness. Our homes are places we go to escape the world. When they are under threat, it can be horribly traumatic.

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