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Seconds repossessions expected to remain low despite Q4 rise
The Finance & Leasing Association (FLA) found that a total of 39 properties were taken into possession by its second charge mortgage providers in Q4 2016, an 18.2% increase on Q4 2015.
However, total annual second charge mortgage repossessions by FLA members fell by 36.8% in 2016 with 144 taking place compared with 228 in 2015.
Rob Derry, managing director of Brunel Mortgages & Loans, felt that despite the Q4 rise, the number of repossessions last year remained low.
“Even though the affordability model for a lot of second mortgages is much less strict than it is for first mortgages, this clearly shows that a slightly more pragmatic approach works and, in general, protects the consumer from taking out unaffordable loans.”
In August last year, the FLA reported that second charge mortgage repossessions had fallen 40% during the second quarter of 2016.
This drop was attributed to tightening underwriting standards in the second charge mortgage market as it became aligned with the first charge market through the implementation of the Mortgage Credit Directive (MCD).
Commenting on the rise during Q4, Scott Thorpe, founder of Access 4 Finance, added: “I’m unsure [regarding] the increase.
“Obviously one property being repossessed is one too many, but in the grand scheme of it, the repossessions have gone down over the past year.
“Since MCD and the alignment with the first charge world, it’s more likely [that] repossessions [will] go down due to more [stress testing with regards to] the client’s ability to repay.”
Martin Stewart, director at London Money Loans, concluded by questioning why there should be a need for any repossessions given the continuation of low interest rates and low unemployment.
“This might indicate a social change going on rather than an economic one – people struggling to live within their means or people stretching themselves too far to maintain a certain lifestyle.
“There will inevitably be unfortunate circumstances where people lose their jobs or suffer illness, but this only goes to confirm a long-held belief of mine that most people have saved nothing for a rainy day or are horrifically under-insured.
“Both need [to be addressed], and sooner rather than later.”
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