One of the biggest hit sectors in the recession is housing.
House sales and purchases have declined sharply, as have property values. So, your home is likely to be worth a lot less than this time last year, for example, and you would find it harder to sell now as there are fewer buyers around.
This is itself is a problem but there is a more significant housing crisis in the UK
at the moment. With more and more UK consumers struggling to manage their finances and their debts the number of home repossessions is also on the increase. According to figures released by the Council of Mortgage Lenders (CML) home repossessions rose by 54% in 2008. This effectively saw 40,000 people lose their homes.
And, the situation is going to get worse not better according to the CML’s projections for 2009. It estimates that repossessions in 2009 will rise to around 75,000 – these will be a mix of lenders forcing the issue and of homeowners simply handing back their keys and walking away from their homes. This is obviously an area of grave concern for many homeowners. Could you be a victim of the recession here?
There are basically two primary reasons why people find it difficult to meet their mortgage commitments and end up losing their home to repossession.
- Job loss – more and more of us will lose our jobs this year given the state of the economy and business in general. Although you can apply for some help here from the government and can ask your lender for help in certain cases this may not be enough to service your debt and you could quickly find that you are in mortgage arrears. This will be made far worse if you have a lot of other debts to service at the same time, especially if they are secured debts that are guaranteed by your home.
- Debt – sometimes you can lose your home simply because your overall debt situation becomes unmanageable. Before the economic bust we had an extended period of economic boom and a lot of us borrowed a lot of money which we are now having to deal with, often with reduced incomes/budgets. If your debts are tied to your home as secured debts then this could put your home at risk of repossession.
There is some good news here however. There is, for example, evidence that repossessions actually slowed down in the later stages of last year. Lenders are being encouraged not to be hasty here and government initiatives are helping people at least cope with their mortgages in the short-term. The key thing to do here – even if things are fine for you financially at the moment – is to work to shore up your finances now. It’s better to think ahead rather than have to deal with this kind of problem if it happens. So, make efforts to repay your debts and try to save for emergencies.