Repossession leaves thousands out of home and in a world of worry

Published on Saturday 18 October 2008 19:42

EACH one is a poignant reminder of hopes dashed and dreams shattered.

On the Wilson Auctions website last week at least 13 of the 45 properties for sale were advertised as being owned by the organisation that provided the mortgage – a clear sign that the homeowners who purchased the property back in the heady days of low interest rates had long departed the place that they wanted to call home.

They were not just properties at the cheaper end of the market either. One was a four-bed duplex penthouse on Edinburgh Waterfront, where developer Gregor Shores last week went into administration.

It was a home that, at the height of the property boom, could have fetched a sum approaching seven figures. It was sold at auction last month for around the guide price of 225,000. Someone, somewhere, got a major bargain.

In Glasgow, a modern two-bedroom flat in Cleveland Street, in the West End, was similarly labelled as belonging to a mortgage lender who had repossessed the property from its unfortunate owner. It sold for another bargain basement price of around the guide price of 105,000.

Properties from Perth, Alexandria, Paisley, Harthill and Greenock testify to how widespread the repossessions phenomenon is becoming. As Scottish Court Services figures reveal, court actions against homeowners struggling to find their mortgage payments have doubled since January 2007.

Precise figures on repossessions in Scotland are not officially collected, but the Council of Mortgage Lenders estimates that 45,000 homeowners will lose the roof over their head in the UK this year. By the normal rule of thumb that means at least 10% – around 4,500 in Scotland – will have had their cherished home taken off them, leaving singles, couples and families with an uncertain future.

One organisation that helps to pick up the pieces is Shelter Scotland, the housing charity, which had 25,000 visits to its website for repossession advice in 2007 – a 42% rise from 2006. It says that impending homelessness can trigger a range of psychological and medical effects.

Spokeswoman Christina Cran said: "People faced with losing their home report a lack of control and insecurity, through not knowing where they are going to be living. Living in temporary accommodation can be a soulless experience, with a seemingly never-ending wait for a permanent home."

All members of families are affected, particularly children, when they are re-housed in accommodation far below the standards they were used to.

"Bad housing and homelessness have a devastating impact on children's lives," she said. "They deny children their rights to a safe and secure home with access to education, play opportunities, a high standard of living and good health."

Studies have shown that schoolwork suffers with children living in bad housing five times as likely to lack a quiet place to do their homework as other children. They often develop severe anxiety, depression and behavioural problems and experience bullying, social isolation and insecurity. Mental health problems are three times as common among homeless children, even a year after being re-housed.

Some experts believe that repossessions in Scotland will reach higher levels in coming months than in the early 1990s when cripplingly-high interest rates in double figures following a recession took their toll among homeowners.

The seeds were sown in the early years of this decade when the Labour government presided over a period of low interest rates and cheap loans that sparked a credit boom.

Similar policies to extend home ownership were pursued in the United States, where customers with poor credit histories were given what are now notoriously-known as sub-prime mortgages. Sub-prime mortgages – which triggered the US credit crunch – are defined as those targeted at consumers with impaired credit history or low credit ratings who might find it difficult to obtain finance from traditional sources.

They were not just a US phenomenon, however. Since April 2005, of 630,000 mortgages arranged in Scotland, 21,130 were sold to people with an impaired credit history. Many of these may now be among the homeowners finding their homes repossessed.

Ken McEwan, managing director of Edinburgh-based property firm McEwan Fraser, which operates sale-and-leaseback deals, said inquiries for his company's help were now running at around 30 a day. He offers worried owners around 80% of the market value of their home; they can then either walk away or lease it back as a tenant.

"It stops an awful lot of repossessions," McEwan said. "The biggest problem is when people take out a mortgage and then take out loans secured against their house at high rates.

"Their payments go up from 700 a month, for example, to 1,500 a month. When there is an economic downturn like the one we are experiencing now they are financially crippled. At least we can provide a solution.

"My worry is that the real problems are only just beginning. We may not even have got started yet."