Stopping repossession "critical"
Friday, 12 Dec 2008 13:25
Repossessions threaten housing market
Holding back repossessions is critical for the health of the UK property market.
Speaking at the launch of the UK Housing Review 2008/09, report author Steve Wilcox from the University of York explained mortgage rescue plans from the government were important, but holding back repossessions was needed.
"Forbearance is far more critical than mortgage rescue," Professor Wilcox said.
"If there is a flood of repossessions, this will depress the property market further and put off recovery further."
So far only major lenders have agreed not to start repossession action until three months after borrowers have fallen into arrears – with some holding back moves for six months.
Major lenders have also signed up to the government's Homeowner Mortgage Support Scheme – where borrowers losing jobs can defer interest rate payments for two years.
But Professor Wilcox highlighted the problem of subprime lenders not signing up.
"Hopefully the scheme will be successful if levels of repossession can be held back.
"But subprime lenders need to sign up."
He also called for the measures outlined in the Crosby Report –which calls for more government guarantees of mortgage lending – to be brought forward.
"The government must do something now… it needs urgency."
Alistair Darling announced in the pre-Budget report the plans had to be cleared by European authorities first.
Professor Wilcox also called new products to aid borrowers – such as a return of mortgage indemnity guarantee (MIG) policies.
The insurance covers the lender from loss in the event of a borrower defaulting – moving the exposure to loss to the insurance industry.
The academic also called for the government to redraw its plans for two million new homes by 2016 – claiming the decline of sterling may reduce immigration as may the opening of labour markets across Europe to the A8 accession countries, such as Poland and the Czech Republic.