Arrears statistics paint depressing picture of repossessions to come
It feels wrong-headed to fret about the outlook for repossessions when we've learned that fewer people have lost their homes in recent months than previously feared, as the Council of Mortgage Lenders revealed on Thursday. The CML also revised its 2010 repossessions forecast downwards for the second time this year, from 48,000 to 39,000.
Sadly, however, it's implausible that the welcome fall in repossessions will continue, and there are several very good reasons for this. Figures out this week confirmed that unemployment continues to rise in Scotland and jobless numbers are set to rise as the government takes an axe to public spending. The pressure on homeowner incomes may be alleviated for a time by low interest rates, but in many cases that's all that's keeping the wolf from the door.
The CML's latest arrears statistics hinted at the extent to which this is the case. The number of arrears cases has fallen, but the fall has been limited to the low arrears band, suggesting low interest rates have helped many households avoid falling into arrears. More significantly, there has been no decline in the number of households in arrears of 10 per cent or more of the outstanding mortgage balance.
This points to a population of struggling homeowners unable to reduce their arrears and kept in their homes only by lender forebearance. That means a change in lender attitudes towards arrears, which is expected, sooner rather than later, will tip thousands of households into repossession proceedings.
At the same time, as outlined on the following pages, Scotland also faces a housing shortage as, thanks partly to the lending crisis in the first-time buyer market, the number of new homes being built continues to fall.
On top of that, the Financial Services Authority's proposals to ban interest-only mortgages will further limit the options open to struggling borrowers.
It all adds up to a depressing outlook that puts this year's fall in repossessions in sobering context.
IN its dying days the Financial Services Authority is making tangible progress in protecting consumers from the worst of the financial services industry, with its efforts to address the payment protection insurance misselling scandal taking another big step this week.
The way in which annuities are sold may one day be seen in a similar light - as a blight on the industry that should have been addressed much earlier. That far too many people squander their hard-earned pension savings on mediocre annuities is hardly a new phenomenon, but it is becoming more costly.
Not only are many people retiring with pension pots decimated by the stock market losses - with only a fortunate minority now benefiting from defined benefit (final salary) pensions - but annuity rates are in the midst of a long-term decline, further reducing the retirement income achievable.
The consequences of PPI misselling pale in comparison with the damage caused by failing to buy the best possible annuity at retirement. For many people it will be the most expensive mistake they ever make - they have to live with the financial consequences for the rest of their lives, possibly consigned to poverty in retirement as a direct result.
And until shopping around for an annuity is made the default option, that expensive mistake will be repeated.