The number of home repossessions rose 15 percent between July and September this year compared to the previous three months, as mortgage rates soared and the cost of living crisis put pressure on household budgets.
In total, 700 homeowner mortgaged properties were seized in the third quarter of 2022, according to data from UK Finance.
But it’s not just owner-occupied properties that have seen a rise in repossessions. The number of bought-to-let properties forfeited also rose 11 percent from July to September, to 390.
How much more will you pay? High interest rate mortgage calculator
Rising repossessions: With mortgage rates and the cost of living on the rise, an increasing number of homeowners may struggle to pay off loans to a lender each month.
Home possession or repossession is the process of a lender acquiring ownership of someone’s home for defaulting on mortgage payments.
While the number of repossessions is on the rise, it is currently still below pre-Covid levels.
Mortgage rates for both home loans and purchase-to-let loans have risen significantly over the year, which may contribute to homeowners’ inability to make their monthly payments.
On May 1 of this year, the average two-year flat rate among homeowners was 2.57 percent, but by October 1 it was 5.43 percent.
On the £200,000 mortgage, the increase in monthly payments increases by £316 from £904 to £1,220.
While fixed-rate homeowners are protected until their set term expires, this means that payments can rise exponentially when you remortgage.
Those with tracker and standard variable rate mortgages are also likely to have seen their payments rise this year.
Figures from UK Finance show the number of homeownerships is increasing again after Covid-19
Research by Citizens Advice has revealed that more than a quarter of mortgage holders would not be able to afford their monthly payments if they increased by £100 a month.
Samuel Mather Holgate, financial advisor at Mather and Murray Financial, said: “If mortgage rates continue to rise, we will inevitably see forced sales increase because the current situation is a perfect storm.
Increased borrowing rates are coupled with staggering energy bills and general inflation that is affecting the cost of basics like food and clothing.
“There may have been increased stress tests on the affordability of the mortgage borrower, but these assumed all else was equal, which they are not.”
Still, the number of delinquent homeowner mortgages fell 1 percent in the third quarter of the year, to 74,440.
Within the total, there were 28,910 homeowner mortgages with arrears representing 10 percent or more of the outstanding balance.
This was the same number as in the previous quarter.
Restoring mutations coincide with higher rates
Wealth management firm Quilter also analyzed the data for repossession, and noted that claims for mortgage possession increased by 30 percent between July and September compared to the same quarter of 2021, rising from 2,832 to 3,680.
She said the number of possession orders issued increased by more than 100 percent from 1,229 to 2,491. This is the legal document that tells a homeowner that the property can be seized by the lender.
Warrants of arrest increased 157 percent from 947 to 2,437, and repossessions by county court bailiffs increased 91 percent from 390 to 744, she said.
Commenting on the figures, Karen Noe, a mortgage expert at Quilter, said: ‘The claim, writ, warrant and repossession by state court bailiffs are all steps in the process that ends with home repossession.
As energy and food prices go up, some people will start to struggle to heat their homes, eat food, and service their mortgage, and this will lead to repossession.
Repossessions spiked after the financial crisis, but since then due to lenders taking a more proactive approach to helping distressed borrowers as well as lower interest rates, repossession levels have dropped dramatically.
However, in the face of a cost-of-living crisis, unfortunately, the numbers of take-backs are beginning to rise again. Historically, periods of high interest rates have coincided with an uptick in the number of repossessions due to individuals’ monthly payments increasing to levels they can no longer afford.
“As energy and food prices go up, some people will start to struggle to heat their homes, eat food, and service their mortgage and that will lead to repossession.”
Noe notes that the sharp increase in holdings compared to last year may be due to FCA’s actions during the pandemic to limit holdings.
The FCA suspended all redemption proceedings from March to September 2020. The FCA then advised mortgage lenders not to initiate or continue possession proceedings until April 2021, unless there were special circumstances.
As a result, there were only 10 holdings from April 2020 to March 2021.
Some of the links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to influence our editorial independence.