Home repossessions defy predictions after mortgage rate rises

The number of home repossessions by finance lenders after mortgage rates went up has decreased significantly – defying the expected trend that more people would lose their homes.

The findings come from the House Buyer Bureau which points out that since the Bank of England started raising interest rates at the end of 2021, the predicted surge in repossessions hasn’t materialised.

Interest rates were pushed up by the bank to bring stability to the nation’s economy after the pandemic – a trend that continued this year as energy prices and war in Ukraine continue to cause economic turbulence.

As a result of these increases, the number of monthly mortgage approvals in the UK since December 2021 has fallen by -19.2% as borrowing becomes more expensive and prospective homebuyers decide to postpone their ambitions.

Impact on the housing market has not been entirely negative

However, the impact on the housing market has not been entirely negative because, as the research reveals, the rate increase has not yet led to a rise in the number of repossessions.

Instead, there has been a significant drop.

The data shows that in the eight months leading up to December 2021, there were 1,739 repossessions across England and Wales.

And in the months following the rates increase, this number has fallen by -26.1% to a total 1,285 repossessions.

Biggest fall in home repossessions was in the East of England

The biggest fall in home repossessions was in the East of England where a pre-rates increase there were 70 repossessions, but this figure has dropped to just 19. This is a -72.9% decrease.

In the South West, 114 repossessions in the eight months before the rates increase has fallen to just 73 in the months since; a drop of -36%.

And in the North West, a total of 403 repossessions has dropped by -32.5% to just 272.

The fall in repossessions has also been significant in the North East (-30.8%), South East (-28.2%), London (-25.7%), and West Midlands (-22.7%).

The number of home repossessions

Meanwhile, the drop in the number of home repossessions has been smaller in Yorkshire and Humber (-2%), Wales (-6.4%), and the East Midlands (-9.3%).

The managing director of House Buyer Bureau, Chris Hodgkinson, said: “Interest rate increases are never welcome news for homeowners with mortgages, so it’s going to be a relief for many to see that repossessions have not become more frequent as a result.

“But this sharp decrease in repossessions doesn’t necessarily mean that homeowners are having no problem with fulfilling their mortgage.

“Instead, a key factor will be the fact that lenders are being advised to avoid rash repossessions in the case of payment shortfalls.”

He added: “They are, for example, being advised to allow homeowners to stay in possession of the property for a reasonable time to enable them to sell the property rather than have it taken away.

“So, while this drop in repossessions is preferable to a rise, it doesn’t necessarily mean that people aren’t struggling with payments and we could well see a spike in repossessions over the coming months, as the patience of lenders wears thin when it comes to those unable to fulfil their repayment obligations.”

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