United Kingdom
Mortgage re-possessions
Key points
- Mortgage re-possessions have been rising sharply since 2004 and, by 2008, were six times the level of 2004. At 47,000 in 2008 in England and Wales, they are now back to the levels of 1994.
- Court orders for re-possession have been rising since 2002 and, by 2008, were four times the level of 2002. At 61,000 in 2008 in the United Kingdom, they are now back to the levels of the early 1990s.
- As court orders for re-possession are an indicator of future re-possessions, the rises in 2007 and 2008 suggest that the number of actual re-possessions will continue to increase in 2009.
- Mortgage owners are a far more diverse group than they once were. 13% of heads of households with a mortgage are now not in full-time work and therefore arguably in an economically vulnerable position. This is a similar proportion to a decade ago but much higher than twenty five years ago, when it was 5%.
- Not surprisingly, the number of households who are homeowners with mortgages increases with income. However, the number of households who have high mortgage interest repayments does not increase with income. So, for example, 500,000 homeowners in the poorest fifth expend more than a quarter of their after-tax income on mortgage interest repayments and this represents half of all mortgage holders in the poorest fifth.
Graph 1: Over time
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Graph 2: By work status
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Graph 3: By income
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Why this indicator was originally chosen
The 1980s saw a rapid contraction of social housing and expansion of home owners buying their home with the help of a mortgage. A large part of this was due to the government's 'Right to Buy' policy which allowed council tenants to buy their homes from the local authority. It also left a considerable local variation in the availability of council housing.
With owner occupation at a far higher level, large numbers of people became vulnerable to arrears, re-possession and negative equity during the downturn in the housing market in the early 1990s. Reduced job security meant that that those with a mortgage were more likely than before to find themselves unable to maintain the repayments on the money they had borrowed. Falling house prices in the 1990s, a result in part of lower inflation, meant that the home might have to be sold for less than it was bought, leaving the erstwhile owner with a continuing, insupportable debt.
Although much less of an issue than in the early 1990s, mortgage debts continue to represent a problem for many people, with powerful detrimental effects on standards of living and on stress and potential implications for re-possession.
Definitions and data sources
The first graph shows two statistics for each year since 1990, namely:
- The actual number of mortgage re-possessions during the year.
- The number of court orders made for mortgage re-possession during the year, noting that this number excludes suspended orders as these do not directly relate to repossessions.
Note that the graph no longer shows data on the number of households in arrears. This is because, as from 2008, the Council of Mortgage Lenders (CML) has ceased publishing the relevant data.
The data on actual re-possessions relates to the United Kingdom. Up to 2006, the data is from the CML. As this data is no longer published by the CML, the data for 2007 onwards is from the Financial Services Authority (FSA). These two sets of data are not quite directly comparable: whereas the CML data is actual re-possessions, the FSA data is the number of individual loan accounts in possession; and whereas the CML data is for 1st charge loans only, the FSA data also includes 2nd and subsequent charge loans (where the borrower takes an extra loan from another lender) where these lenders report their loan accounts as a possession. The net result is that, for any particular year, the FSA numbers are slightly higher than the CML ones; for example, in 2007, the FSA number of 27,900 compares with a CML figure of 27,100.
The data on court orders relates to England and Wales. The data is from the Ministry of Justice (with some of the data for earlier years being from the UK Housing Review table 53).
The second graph shows the proportion of households with mortgages where the head of the household has the economic status shown. The total is effectively the proportion of households with mortgages where the head of the household is not in full-time work. The data is from the Survey of English Housing and relates to England only.
The third graph shows the number of households with mortgages by level of household income. For each fifth of the income distribution, the number is divided according to the proportion of their net household income that their mortgage interest repayments represents, namely: less than 25%; between 25 and 50%; and more than 50%.
The Financial Services Authority (FSA) describes a mortgage loan to gross income multiple as 'high' if it exceeds 2.75 for a single person or 3.5 for a couple. Mortgage interest rates average, say, around 6%. The ratio of net to gross income averages around 70%. So, the FSA is effectively saying that a mortgage is 'high' if the interest payments as a proportion of net household income exceed 24% (2.75 * 0.06 * 0.7) for a single person and 30% (3.5 * 0.06 * 0.7) for a couple. In this context, the households in the middle bars on the graph (25-50% of net households income) can reasonably be described as having 'high' mortgage interest payments whilst those in the bottom bar (more than 50% of net household income) can reasonably be described as having 'very high' mortgage interest payments.
The data source for the third graph is Households Below Average Income, based on the Family Resources Survey (FRS), and the data relates to the United Kingdom. Income is disposable household income before deducting housing costs and the allocation of households to income quintiles uses gross 'equivalised household income', which means that the household incomes have been adjusted to put them on a like-for-like basis given the size and composition of the households. The averaging over the latest three years has been done to improve the statistical reliability of the results.
Overall adequacy of the indicator: limited. The decision of the CML in 2008 to stop publishing any statistics on arrears and re-possessions is particularly unfortunate given the scale of change currently taking place. Nevertheless, the overall trends over time are clear.
External links
- See the New Policy Institute article in the Spring 2008 Bevan Foundation Review entitled Getting ready to meet the wolf? The looming crisis in housing.
- See the money advice trust information hub, which is a website that provides access to a range of information for people with an interest in money advice, credit, debt and debt remedies and recovery.
- For a wide-ranging discussion of all aspects of housing, including its links with poverty, see the 2006 Joseph Rowntree Foundation report entitled Housing and neighbourhoods monitor.
- See the Joseph Rowntree Foundation report entitled Home ownership and poverty in Britain.
Relevant 2007 Public Service Agreements
None directly relevant.
The numbers
Graph 1
| Year | Actual re-possessions (United Kingdom) | Court orders for re-possession (England and Wales) |
|---|---|---|
| 1987 | 26,400 | 25,800 |
| 1988 | 18,500 | 25,300 |
| 1989 | 15,800 | 28,100 |
| 1990 | 43,900 | 54,700 |
| 1991 | 75,500 | 73,900 |
| 1992 | 68,600 | 43,000 |
| 1993 | 58,600 | 32,000 |
| 1994 | 49,200 | 30,500 |
| 1995 | 49,400 | 27,800 |
| 1996 | 42,600 | 22,500 |
| 1997 | 32,800 | 22,500 |
| 1998 | 33,900 | 25,300 |
| 1999 | 30,000 | 23,600 |
| 2000 | 22,900 | 20,400 |
| 2001 | 18,300 | 17,800 |
| 2002 | 12,000 | 16,200 |
| 2003 | 8,500 | 16,700 |
| 2004 | 8,200 | 20,300 |
| 2005 | 14,600 | 33,100 |
| 2006 | 22,400 | 46,000 |
| 2007 | 27,100 (CML), 27,900 (FSA) | 52,000 |
| 2008 | 47,000 (FSA) | 61,000 |
Graph 2
| Year | Part-time employment | Unemployed | Economically inactive | Total |
|---|---|---|---|---|
| 1981 | 1% | 3% | 1% | 5% |
| 1993/94 | 4% | 6% | 8% | 18% |
| 1996/97 | 4% | 2% | 5% | 11% |
| 1997/98 | 4% | 2% | 9% | 15% |
| 1998/99 | 5% | 1% | 9% | 15% |
| 1999/00 | 4% | 1% | 9% | 15% |
| 2000/01 | 4% | 1% | 9% | 14% |
| 2001/02 | 6% | 1% | 8% | 14% |
| 2002/03 | 6% | 1% | 7% | 13% |
| 2003/04 | 6% | 1% | 6% | 13% |
| 2004/05 | 6% | 1% | 6% | 13% |
| 2005/06 | 6% | 1% | 6% | 14% |
| 2006/07 | 7% | 1% | 6% | 14% |
| 2007/08 | 6% | 1% | 6% | 13% |
Graph 3
| Group | Household income quintiles (before deducting housing costs) | ||||
|---|---|---|---|---|---|
| Poorest fifth | 2nd | Middle fifth | 4th | richest fifth | |
| Mortgage interest is 50% or more of disposable income | 290,000 | 40,000 | 30,000 | 20,000 | 10,000 |
| Mortgage interest is 25-50% of disposable income | 160,000 | 240,000 | 290,000 | 320,000 | 300,000 |
| Mortgage interest is less than 25% of disposable income | 470,000 | 950,000 | 1,600,000 | 2,190,000 | 2,820,000 |