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Expat Investor : May June 2008
Fast Facts 44481 PROPERTY INVESTMENT May/June 2008 ? EXPAT INVESTOR 23 10% fewer repossessions than expected in 2007 AT 0.23%, the repossession rate was less than half the rate experienced throughout the first half of the 1990s. And at 13,500 the number of repossessions in the second half of 2007 was almost identical to the number in the first half of the year (13,600). The Council of Mortgage Lenders (CML) had previously forecast that there would be 30,000 repossessions in 2007, but the actual figure is nearly 10% lower than forecast, at 27,100. Although repossessions have risen since their remarkable low point of fewer than 10,000 a year in 2003 and 2004, they continue to represent a tiny fraction of all mortgages. Fewer than half a per cent of all mortgages had accumulated arrears of more than six months at the end of 2007, and the profile of arrears has returned to virtually the same levels as in the first half of 2006. The rate of 6+ month arrears is only around one-seventh of the level experienced in the early 1990s. Looking ahead, the CML says it remains difficult to forecast the likely level of arrears and repossessions in 2008 as conflicting factors are at work. The good news is that the impact of payment shock is likely to be more muted than previously expected, thanks to the downward path that interest rates now appear likely to follow. But there is no room for complacency. Funding pressures remain, and are having a specific impact on the capacity of the adverse credit sector to meet demand. This may affect arrears and repossessions. Over the past year, the CML and lenders have become concerned about the activities of sale-and- leaseback companies, which typically offer to buy properties from home- owners at less than their market value, and rent them back to the former owner as a tenant. In theory, this type of arrangement could be a good solution for some borrowers facing mortgage problems. But the CML warns there is no regulation of this sector and the risk of consumer detriment seems high. Michael Coogan, CML Director General, comments, “Lenders take their responsibilities to borrowers facing repayment difficulties very seriously, and many go to exceptional lengths to provide debt counselling, reschedule payments, extend loan terms, or in some circumstances even allow payment breaks. They abandon repossession action right up to the last moment if they can reach a payment solution consistent with both the borrower’s and the lender’s interests. “Despite this, the number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets. “No-one is necessarily to blame for this – even the best risk assessment cannot provide a crystal ball insight to the future for each particular borrower. But that is all the more reason to ensure that there is a fair and reasonable balance of responsibility between consumers themselves, their advisers and lenders, and the system of state support to ensure that home- ownership remains sustainable and that repossessions are minimised. Anyone who thinks they might be heading into difficulty should contact their lender, as problems are easier to resolve if they are tackled at an early stage. Lenders want to avoid repossessions just as much as borrowers do.” MIXED economic messages are causing confusion for remortgagers. Abbey Mortgages has found that the current mixed opinions about the outlook for the economy has left homeowners in a quandary about the best mortgage to choose. Despite the recent base rate cut, and almost unanimous expectations that base rate is likely to continue on a downward journey, the uncertainty about how much and when is leaving many homeowners in a position where they do not know which mortgage to choose. Fast Facts 55460 Combined with recent moves by lenders to re-price their fixed and tracker rates – for instance Abbey Mortgages has recently cut its five year fixes by nearly half a per cent – the research shows that almost two- thirds of the British home-owning population would find it more difficult to choose their next mortgage if they were remortgaging tomorrow. Nici Audhlam-Gardiner, Head of Abbey Mortgages, tells Expat Investor, “Depending on who you talk to there are different outlooks for the UK economy and for Bank of England base rates. While most economists agree they will go down, there is debate about how much they will fall and when. This uncertainty leaves homeowners with a bit of a dilemma on their hands – what is the best mortgage to go for? Our research shows that most popular still is the two-year fixed rate deal, but this is followed closely by five year fixes. This may in part be because they are looking extremely competitive – Abbey has just cut rates on its five-year deals by 0.46 per cent so they are now market leading at 5.63 per cent.” Remortgagers confused over best deal to choose Skipton Guernsey Limited (SGL) is a wholly owned subsidiary of Skipton Building Society. Deposits made with SGL are not covered by the Financial Services Compensation Scheme established under the UK Financial Services and Markets Act 2000. Skipton Building Society, established since 1853, has given an undertaking agreeing to discharge the liabilities of SGL in so far as SGL is unable to discharge them out of it own assets and whilst SGL remains a subsidiary of Skipton Building Society. SGL is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 1994, as amended and conducts business only in Guernsey, it is not authorised to accept deposits elsewhere. Copies of the latest audited accounts are available on request. *AER stands for Annual Equivalent Rate and illustrates what the rate would be if interest was paid and added each year. • 6.00% gross p.a./AER on balances between £10,000 and £99,999 • 90 days' notice for withdrawals • Minimum opening balance £10,000 • Prompt notification of interest rate changes • Variable rates For full details of this account and other Notice and Access accounts call: 01481 727374 visit: www.skipton guernsey .com/gn Outlook bright with rates upto INVEST IN THIS EXCLUSIVE HIGH INTEREST STERLING ACCOUNT % 6.2 5 STERLING ISLAND NINETY On balances of £ 100,000 or more gross p.a. / A E R * Fast Facts 55016
July August 2008