Why home repossessions are declining despite rising mortgage costs

Posted on Tuesday, January 3, 2023

At the end of 2021, the Bank of England began raising interest rates following years of record low borrowing levels, with many fearing the move would see a rise in people losing their homes as mortgage payments became more expensive. However, the number of homes being repossessed by money lenders has significantly decreased, bucking the expected trend, according to analysis from House Buyer Bureau.

In December 2021, the Bank of England started increasing interest rates to try and bring stability to the nation’s economy in the wake of the pandemic, a trend that has continued into 2022 as energy prices and the 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 until a more stable time.

But despite this, the impact on the housing market has not been entirely negative because, as Home Buyer Bureau’s research reveals, the rate increase has not yet resulted in a rise in the number of people having their homes repossessed. Instead, there has actually been a significant drop.

In the eight months preceding December 2021, there were 1,739 repossessions across England and Wales.

The latest available data shows that in the months following the rates increase, this number has fallen by -26.1% to a total of 1,285 repossessions.

The biggest fall in repossessions has been reported in the East of England where a pre-rates increase total of 70 repossessions 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 have 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%).

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

Chris Hodgkinson, Managing Director of House Buyer Bureau, commented: “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.

"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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