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Marketing March 18, 2022 No Comments

Possession claims look set to double amid cost of living crisis

Possession claims look set to double this year due to a combination of benefits freezes, soaring food and energy bills and the end of Covid eviction bans.

The number of possessions in the private rented sector could jump by more than 40,000 this year year, a well-known evictions expert has has predicted as landlords take action to protect their property investments.

Landlord Action’s Paul Shamplina told ITV’s Tonight programme: “The courts are getting better at processing possession cases, but even now the eviction restrictions have been lifted, it will take a landlord the best part of six months to get their property back.”

Tonight, which airs today at 8.30pm on ITV, looks at the PRS where thousands of people risk losing their homes.

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The buy-to-let market has seen a number of regulatory changes in recent years, particularly during the pandemic with eviction suspensions and extended notice periods but, with the ban on bailiff-led evictions at an end and a growing cost of living crisis, there is a new wave of imminent evictions looming.

Shamplina provides an exclusive insight into evictions and arrears by showing viewers the real-life eviction process as well as exposing the different elements that are causing the volume of possession claims to increase.

He takes along ITV’s political correspondent Daniel Hewitt as he serves notice to a number of tenants, including one tenant living at a property in Harrow who had significant rent arrears, and an eviction in Hounslow featuring a tenant in serious arrears.

Shamplina added: “The Tonight programme really portrays the level of claims we’re seeing right now, provides the reality of how both landlords and tenants alike are struggling and looks at what the government can do to help with this tougher economy in 2022 and beyond.”

By MARC DA SILVA

Source: Property Industry Eye

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Marketing February 14, 2022 No Comments

Mortgage arrears fall in fourth quarter: UK Finance

The number of homeowners in arrears on their mortgage continued to decline in the fourth quarter of 2021, despite the removal of the government’s furlough scheme at the end of the September.

Figures from the UK Finance show there were a total of 79,620 homeowner mortgages in arrears at the end of December 2021. This is 750 fewer mortgages when compared to the previous quarter’s figures.

These figures related to mortgages where arrears are 2.5% or more of the outstanding mortgage balance.

Within this total there were 26,850 homeowner mortgages in early arrears (those between 2.5% and 5% of balance in arrears), a decrease of 2% on the previous quarter and 14% fewer than the same period in 2020.

UK Finance says these early arrears figures remain substantially lower than the numbers seen before the pandemic began.

However, UK Finance says the number of homeowners with more significant arrears (representing 10% or more of the outstanding mortgage balance) has risen. In total there were 30,010 mortgage holders in this position, 350 more cases than the previous quarter. This figure has risen — from a low base — since Q1 2020, although the rate of increase has slowed.

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UK Finance says these customers were already in relatively deep arrears positions prior to the pandemic, and will likely have made use of the full six months of Covid-19 payment deferrals scheme. They are equally likely to be receiving (or in need of) further support through lenders’ tailored forbearance options.

The figures show there were a total of 6,010 buy-to-let mortgages in arrears in the fourth quarter of 2021 – an increase of 2% compared with the previous quarter but 1% down on the number a year previously.

When it comes to repossessions, the figures show that there were 390 homeowner mortgaged properties and 320 buy-to-let mortgaged properties taken into possession in the final quarter of 2021.

UK Finance says year-on-year comparisons will look unusually large due to the ‘Possession Moratorium’ from March 2020 to 1 April 2021, over which period no enforced possessions took place.

In absolute terms, there were 20 fewer possessions in Q4 2021 compared with the previous quarter. The voluntary possessions moratorium ended on 4 January 2022, and the number of possessions will now gradually increase as the courts resume working through the backlog of cases accumulated over the first moratorium.

Commenting on these figures Equifax’s chief data and analytics officer Paul Heywood says while these figures are encouraging there are potential dangers on the horizon.

He says: “Far fewer homeowners than feared fell into arrears on their mortgage repayments in the early months of the pandemic, thanks in part to emergency consumer protections such as furlough and mortgage payment holidays.

“Even today, we are still seeing a relatively low level of arrears as most homeowners in the UK took advantage of lockdowns to build up rainy day savings and insulate against future income shocks.

“That picture, however, is quickly changing. Prices are rising, interest rates are creeping up, and unless wages keep pace, most borrowers will see their finances squeezed over the coming months.

“Equifax data suggests that these financial pressures are already leading to growing numbers of people falling behind on loan repayments in the consumer credit and motor finance space, and we would expect mortgage arrears to follow suit in the coming months.”

He adds: “As the UK walks headlong into a cost of living crisis, credit affordability is more important than ever, and we encourage credit providers, whether they be lenders or utility companies, to be looking closely at how innovations such as Open Banking can help them to identify people in need of help before they fall into acute financial difficulty.”

Source: Mortgage Finance Gazette

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Marketing January 11, 2022 No Comments

Mortgage arrears fall to lowest level since mid-2000s

New mortgage arrears cases have reached their lowest level since the global financial crisis of 2008, but rate rises could lead to more arrears, a tax advisory firm has warned.

According to Paul Rouse, partner at Mazars, there were just 8,597 new cases of arrears by the end of 2021, compared to 40,000 a quarter at the height of the global financial crisis.

But Rouse warned this good news might not last, with an increase in arrears seemingly ‘unavoidable’.

He said given the Bank of England’s recent interest rate rise from 0.10 per cent to 0.25 per cent – and more on the horizon in 2022 – it may be “inevitable” that more mortgages fall into arrears.

Over the past decade, record low interest rates created an environment where homeowners had been able to avoid arrears as mortgage providers followed the BoE’s base rate down.

In recent years, increased savings and reduced expenditure during lockdown and the effects of the furlough scheme have also contributed to driving mortgage arrears down.

Banks also contributed to the low level of defaults on mortgages by following Financial Conduct Authority guidance in 2020 to show forbearance to borrowers in difficulty during the pandemic.

According to Mazars/BoE data, the total number of mortgages in arrears is also near record lows, with 122,061 cases in total in the UK at present.

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But inflation has reared its head, with UK GDP having been widely forecast to increase by nearly 5 per cent in real terms this year, and inflation expected to touch 6 per cent and unemployment at just over 4 per cent.

Rouse said: “With interest rates rising to combat inflation – we may in turn see mortgage arrears and rates go up soon. If the Omicron variant persists it may delay the rise but an eventual increase is inevitable.

“The danger if interest rates continue to rise some who have been comfortably repaying their mortgages may begin to struggle.

“While the vast majority of home owners can repay their mortgages at the current interest rates without difficulty, many would find it significantly more challenging if interest rates were 5 per cent or higher.”

Lower rates for longer?

In March 2009, the BoE put the rate down to 0.5 per cent, the lowest level it had been since October 1694, when the Bank first began recording rates.

It stayed at this level until August 2016, when it dropped briefly to 0.25 per cent following the vote to leave the EU in June of that year, before rising again to 0.5 per cent in 2017.

Since then, the BoE merely tinkered with the levels, dropping them to 0.1 per cent as a result of the Covid-19 pandemic.

With lower base rates, borrowers have enjoyed lower levels of interest on their mortgage loans.

Even at the start of 2022, mortgage lenders were lowering some rates to encourage potential homeowners.

For example, the Nottingham welcomed in 2022 by announcing rate drops of up to 70 basis points across its residential range.

Its two-year fixed 80 per cent LTV product with £1,499 (£199 upfront) fees was reduced from 2 per cent to 1.3 per cent, while the building society cut the rates of two and five-year fixed products – all available for purchase or remortgage – at 85 per cent and 95 per cent loan-to-value.

Meanwhile, mortgage approvals are also still high and likely to remain so for much of 2022.

Kimberley Gates commented: “The stamp duty holiday helped spur a huge flurry of homebuyer activity for much of 2021 and so a steady decline in mortgage approvals was always likely to materialise following the final September deadline.

“However, this decline should be viewed as a return to pre-pandemic normality rather than a sign of dwindling health and the market continues to defy expectation and exceed industry forecasts where top-line performance is concerned.”

She said while 2022 was “unlikely” to bring the same frantic market conditions as the last year, Sirius does not expect there to be a significant reduction in buyer demand and therefore any further notable decline in mortgage approval levels.

By Simoney Kyriakou

Source: FT Adviser

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Marketing June 30, 2021 No Comments

Homeowner arrears ‘low’ as renters absorb pandemic shock

The share of mortgage borrowers falling behind on debt repayments has remained “relatively low” during the pandemic, but the situation is worse for renters, according to the Bank of England ‘s latest research.

Whilst the proportion of mortgage balances in arrears has continued to resist a sharp rise since the start of the pandemic, the central bank’s quarterly update on household debt highlighted a worse outlook for renters.

“The Covid crisis has had a larger impact on renters’ finances than on homeowners’ finances,” it said.

“Renters were more likely to have lost their jobs or been furloughed, relative to households with mortgages or those who own their home outright.

“Survey evidence also suggests that more renters have seen a fall in income, a pattern which persisted over the crisis.”

Such observations have prompted the central bank to warn that “pressure on renters’ finances may result in defaults and losses for lenders”.

It added: “A fall in rental payments may lead buy-to-let borrowers to sell properties quickly, amplifying house price falls in a downturn.”

The National Residential Landlords Association published research earlier this year which suggested 840,000 private renters in England and Wales could have built rent arrears since March 2020.

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Surveying 2,077 private tenants, the membership body found 7 per cent of tenants had built up arrears as a direct result of Covid. Some 18 per cent of those in arrears had rent debts of more than £1,000.

More generally, the research also showed 11 per cent of private renters – between November and December 2020 when this survey was conducted – were unemployed.

Due to the government’s “no ‘one-size fits all’ approach” to rent payments during the pandemic, it concluded that “rent levels agreed in the tenancy agreement remain legally due and tenants should discuss with their landlord if they are in difficulty”.

The Bank of England said in its latest report if “renters cut consumption to keep up with rental payments this could amplify a downturn”.

It continued: “Renters are less likely to have savings compared to mortgage borrowers and spend a significant portion of their income on housing costs.”

This dip in income across the UK’s renting demographic has had a parallel impact on landlords’ income, according to the NRLA.

Out of 1,391 landlords it spoke to at the tailend of last year, 60 per cent said they had lost rental income as a result of the pandemic. And 39 per cent of this majority said those losses were continuing to increase.

With renters and landlords having absorbed the brunt of the pandemic-induced market shock, mortgage borrowers have, in contrast, benefitted from payment deferral schemes.

Since March 2020, the schemes have allowed borrowers to temporarily freeze mortgage and unsecured loan repayments, providing a cushion against any fall in income.

“Though payment deferrals were available to borrowers with either mortgage debt or unsecured debt, they appear to have had more of an impact in supporting those with mortgages,” the Bank of England said.

It cited UK Finance figures, which suggest around one in six UK mortgages were on payment deferrals around their peak in June 2020.

“The widespread use of mortgage deferrals in particular, has helped borrowers to manage temporary changes in their income through the crisis,” the bank concluded.

By Ruby Hinchliffe

Source: FT Adviser

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Marketing June 24, 2021 No Comments

Call For Government Action To Avoid Arrears Crisis

Landlords in England are being forced into a corner because tenants are not being given the financial support they need, said the National Residential Landlords’ Association this week.

Many landlords now have to make a choice between accepting no income or resorting to repossessing their property, it claimed.

A high proportion of private landlords have allowed rent free periods during the coronavirus crisis, or allowed rents to be deferred. Six in ten of these have absorbed the lost income by using personal savings. But ‘the goodwill of landlords in the face of mounting rent debts cannot continue without support from the Treasury’, warned NRLA.

Its latest survey estimated that over 800,000 people living in the private rented sector in England and Wales now have rent arrears that have been built up during since the coronavirus lockdown. Of this group, eight in ten were not in arrears prior to the start of the pandemic.

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‘To help resolve this crisis, the Government should introduce new measures to bring housing benefit support back into line with market rents’, said NRLA. ‘Government data shows that across the UK, in February 2021, 55 per cent of private rented households in receipt of Universal Credit which included housing cost support, had a gap between that and the rents they paid. The average shortfall was £100 a month. Despite this, the Chancellor froze local housing allowance rates in cash terms from April this year, a decision the Institute for Fiscal Studies branded “arbitrary and unfair” ‘.

The NRLA is calling for the Local Housing Allowance to return, at the very least, to a level that will cover the bottom 30 per cent of market rents in any given area, but preferably for it to be increased to a level that covers average rents. It also wants a Government guaranteed, interest free, hardship loan scheme to help tenants pay off rent arrears built since the lockdown began.

‘The Chancellor has clearly decided on a strategy of making landlords the scapegoats for a crisis of his own making’, claimed NRLA chief executive Ben Beadle. ‘For less than the cost of the Eat Out to Help Out Scheme he could provide landlords and tenants with the financial support they need to keep tenants in their homes and prevent damage to credit scores.

‘Landlords want to sustain tenancies wherever possible, but without the support so many tenants desperately need, the Chancellor will need to accept the tragic costs of his failure to act’.

Source: Landlord Knowledge

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Marketing May 31, 2021 No Comments

Increases in mortgage arrears expected this year, says UK Finance

More home-owners are expected to fall into mortgage arrears this year as the economic repercussions of the coronavirus pandemic continue to be felt, according to UK Finance.

The trade association, which represents the banking and finance industry, said mortgage arrears remained close to historically low levels in the first three months of 2021.

From March 2020 to the end of March 2021, lenders were offering payment holidays of up to six months to borrowers whose finances had been affected by the coronavirus pandemic.

Nearly 2.9 million mortgage payment deferrals were granted while the scheme was active.

With the economic impact of Covid-19 continuing to be felt, we anticipate there will be further increases in mortgage arrears during 2021
Eric Leenders, UK Finance

For borrowers who need additional support beyond the six-month payment holidays, lenders are continuing to offer tailored support.

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UK Finance’s latest figures show a small increase of 230 mortgages in arrears compared with the previous quarter, with a total of 77,640 home owner mortgages in arrears of 2.5% or more of the outstanding balance.

Within the total, there were 27,280 mortgages with significant arrears representing 10% or more of the outstanding balance. This was an increase of 620 on the previous quarter.

UK Finance said this figure has slowly increased since early 2020 but from a low base, largely driven by customers who had several missed payments before the pandemic.

Eric Leenders, managing director of personal finance at UK Finance, said: “While there was a slight rise in total arrears in quarter one 2021 compared to the historic low levels seen before the pandemic, the additional support from lenders has helped many mortgage customers stay out of arrears.

“With the economic impact of Covid-19 continuing to be felt, we anticipate there will be further increases in mortgage arrears during 2021.

“Any customer who is concerned about their finances should contact their lender early to discuss the options and tailored support available to them.”

Only 190 home-owner mortgaged properties and 180 buy-to-let mortgaged properties were repossessed in the first quarter of 2021.

Although Financial Conduct Authority (FCA) guidance allowed firms to re-start litigation activity from November 2020, lenders voluntarily committed to pause repossessions in line with a “winter truce” from mid-December 2020 to mid-January 2021, UK Finance said.

It added that repossessions are expected to eventually increase due to the backlog of cases that did not take place in 2020.

These cases will have been in train before the pandemic, it said, adding that repossessions are always a “last resort”.

By Vicky Shaw

Source: Belfast Telegraph

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Marketing May 17, 2021 No Comments

Increases in mortgage arrears expected this year

MORE home-owners are expected to fall into mortgage arrears this year as the economic repercussions of the coronavirus pandemic continue to be felt, according to UK Finance.

The trade association, which represents the banking and finance industry, said mortgage arrears remained close to historically low levels in the first three months of 2021.

From March 2020 to the end of March this year, lenders were offering payment holidays of up to six months to borrowers whose finances had been affected by the coronavirus pandemic.