2008 looks to be starting the way for an increase in the number of properties being repossessed. It is widely predicted that throughout the course of 2008 there will be some where in the region of 45,000 homes repossessed due to people not being able to afford their mortgage payments. This is just the tip of the iceberg though as there is also expected to be somewhere around 170,000 homeowners who will be severely struggling to pay their mortgages.
This is an incredible number of people who are living in a financial black hole, the reason for a great deal of these problems is there are expected to be lots of people who originally took out a fixed rate mortgage coming to the end of their term. The mortgages that they took 5 or 10 years ago on a low interest rate will come to an end and their payments will go through the roof when they either need to remortgage, this will be enough to tip many over the edge. The market has seen a considerable down turn and mortgage approvals have also seen a drop and over the last quarter approvals have fallen to the lowest level since 2005.
Banks taking a back seat
Many of the financial institutions have now completely withdrawn fixed rate mortgages and no longer offer this stability to people taking out mortgages. This leaves many more people at the mercy of the national bank and the interest rate rises. The good news though is analysts do not expect interest rates to rise further throughout 2008, but has this come too late for many who will be paying the biggest price.
The problems people are facing have now seen a boom in the latest property industry, the rent back schemes. There has been a significant rise in websites and companies that will buy your property off you and then let you rent it from them so you can stay in your house, known as rent back schemes or sale and lease back schemes. This industry has been unregulated and many people have been stung by the many of the companies operating in this sector. The rent back operators will often only offer around 85% of the market value of the property but this depends on a market valuation and could be as low as 70%. Some of the worst cases have seen people sell their property for way below the market rate, then pay rent to the company to live there only to find the company has gone bankrupt and the banks are repossessing the property. In these cases the previous homeowner no longer owns their home but also find that they are left without the home to live in when the bank sells it on. Some of these people had been offered to be able to buy back their property at a later date. These schemes can render many people homeless and also pay a significant part to the credit crisis.
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