Figures released yesterday by UK Finance, the trade organisation and lobby group for the banking and finance industry that represents more than 300 firms across the industry, shows that home repossessions for the third quarter 2022 (July, August, and September) were up 15% compared to the same period last year. Buy to Let repossessions were also up 11%.
UK Finance puts this down to higher costs of living i.e., inflation and of course higher interest rates on mortgages that were not fixed rate before rate rises started.
The perfect storm of costs of living increases, inflation in general, mortgage interest rate rises, rent arrears, falling houses prices and pressure on landlords with higher taxation, fire safety improvements and energy efficiency improvements are adding pressure across the property market.
Recession will no doubt lead to more repossessions as more people will lose their jobs. It is widely forecast that the current squeeze could push house prices down between 10-15% in 2023.
Higher LTV Problem
This may then also push some property owners into forced sales as they cannot then secure a remortgage to a stable fixed rate as loan to value (LTV) ratios may be much lower. If you have a £75,000 mortgage on a £100,000 property today, this has a good LTV of 75% but if your property’s value falls to £85,000 next year, it will so much more difficult to secure a remortgage with a revised LTV of 88.25%. This is turn may create even more difficulty with forces sales and driving property prices even lower until 2024 where we suggest property prices will likely start to recover..