Credit crisis robs Scots of homes

Published on Saturday 18 October 2008 19:42

HOME repossession cases have doubled in Scotland since the start of the credit crunch, according to disturbing new figures which lay bare the growing economic crisis facing the country.

There were 1,031 court actions for home repossession in September, compared with 504 in January last year – an increase of almost 105%.

The official statistics from the Scottish Courts Service show repossession cases have exceeded 1,000 a month for the past three months in the clearest indication yet of the massive – and growing – financial pressure on Scottish homeowners.

Sheriff courts in every one of Scotland's cities and major towns have shown increases in repossession actions brought by mortgage lenders since January 2007.

And although not every case results in repossession, experts last night agreed the figures were compelling evidence of how the economic crisis is destroying the home-owning dreams of thousands of Scots.

Scotland on Sunday revealed last week that almost 38,000 jobs could be lost north of the border by the end of next year. In a further indication of the seriousness of the problems facing the economy, Chancellor Alistair Darling said last night that the Government planned to pour billions of pounds into public spending.

He said: "This is a time when you have to support the economy. You will see us switching our spending priorities to areas which make a difference." Darling said plans to build two aircraft carriers – to be assembled in Rosyth – would go ahead, quashing rumours the project was in danger.

But the Keynesian-style rescue plan will come too late for thousands of homeowners. This newspaper has obtained details of repossession cases for every sheriff court in the country. In Edinburgh, the first quarter of 2007 saw 226 actions, rising to 297 in the third quarter of this year. In Glasgow over the same period, actions rose from 472 to 598. In Aberdeen, the figures increased from 22 to 59.

Some housing economists now believe the actual repossessions rate may rise to above the last peak in the early 1990s, when interest rates were in double figures.

Actions have soared, they say, because lenders worried about falling property prices have become more aggressive in reclaiming properties from defaulters.

Credit card debt in Scotland is also at record levels, which means more homeowners have run out of money to pay monthly mortgage charges. At the same time, living costs for basic items – such as food, petrol and energy bills – have escalated sharply, further reducing money available for mortgages.

In addition, the welfare benefit system has changed since the mid-1990s, so homeowners in arrears are no longer able to gain immediate access to state mortgage relief payments.

Gwilym Pryce, Professor of Urban Economics and Social Statistics at the University of

Glasgow, said: "The figures are scary. It shows lenders are being very quick off the mark.

"This is not just a quirk in the market, this is very serious. The rate got quicker after the New Year. If unemployment starts to rise now you are going to get a big increase in repossessions that you wouldn't have had previously.

"There was a big spike in repossessions in the early 1990s, but the landscape has changed dramatically since then. This is the first time we have had so many people with so much debt at a time of rapidly increasing prices."

Graeme Brown, director of Shelter Scotland, the housing and homelessness charity, called for lenders to act responsibly. On Friday, it emerged that the nationalised Northern Rock Building Society's repossessions soared in the first six months of this year compared with the previous six months.

Brown said: "It is truly alarming to see a rise in the numbers of lenders in Scotland taking action to repossess people's homes through the courts.

"The Government bailed out lenders recently; they should afford the same to their customers.

"Throwing people out of their homes simply traumatises families, adds to the homelessness figures and creates more pressure on temporary accommodation."

He added: "These figures are only part of the picture, as not all actions end in repossession, and before things even come to court, some people could feel forced to sell up."

Mary Mulligan, Labour's spokesman on housing and MSP for Linlithgow, said: "This is very worrying. The Government should look at providing more alternatives such as mortgage-to-rent schemes run by housing associations, which prevent people losing their homes."

Last night, the UK government revealed it planned to introduce new measures that would make it more difficult for banks to repossess homes.