Mortgage Defaults on the Rise as More People Become Unemployed
According to experts at City the number of homeowners defaulting on their mortgage could rise to about 400,000 by 2011 with the number of unemployed reaching a high of 3.5 million.
Ed Stansfield of Capital Economics equates the results of the current recession to that of the early 1990’s. At that time the housing crash and the recession resulted in 350,000 mortgage defaults. He expects that the unemployment statistics for 2011 will exceed that of the early 1990’s because of the close association between job losses and the inability of homeowners to make their monthly mortgage payments.
Stansfield projects that unemployment figures will reach a staggering 3.5 million by 2011. Banks are reporting that there are signs that this prediction is very likely to become reality.
Reports from Lloyds Banking Group show that at least 20% of the customers are now in a state of negative equity where they owe more money on their home than it is worth on the housing market.
As of the end of June, 2009, the largest High Street bank in Britain says over 83,000 of its mortgage customers are currently in arrears, representing an increase of 26% from 2008. The figures of arrears at the Bank of Scotland have not yet been released, but Northern Rock, a nationalised bank reports that it has more than 22,000 customers in arrears.
The Halifax division of Lloyds, though, is reporting that they are seeing signs of improvement in the housing industry. This is based on the fact that house prices are on the rise. In July house prices rose by 1.1% to an average price of £159,623. In spite of this increase, however, house prices are still about 12% lower than what they were last year with an average home selling for about £180,000.
The Royal Institute of Chartered Surveyors warns consumers not to read too much into the data. According to a spokesperson for this institute, “There has been a clear change in the housing market in the last few months and as a result it is unlikely that we will now see the kind of house price falls widely predicted at the start of the year. However, the outlook for 2010 is fairly uncertain and there is a real risk prices may slip back. Affordability is still stretched and mortgage finance, while improving, is fairly hard to come by.”
There is no need to panic if you feel that you are in danger of losing your job and think that you may end up defaulting on your mortgage putting your home at risk. Those who are finding themselves facing unemployment should discuss options with their lenders so that they can find ways of being able to continue making their payments and enjoying a clean credit record.
Lenders do recognize that during this recession there are many people in financial difficulty and are willing to help them find ways of easing the burden.
