Boom Buyers Home Repossession Figures Rising
More than 7 per cent of borrowers who took out mortgages in 1989 have had their properties repossessed, according to Moody's Investors Service, the rating agency.
A study by the agency of the mortgages taken out between 1985 and 2003 showed how home-buyers at the peak of the housing boom were much more likely to get into financial trouble.
Jonathan Livingstone, analyst and co-author of the report, said mortgages taken out between 1985 and 1987 were less than half as likely to fall into default as loans taken out between 1988 and 1990.
People who had taken out mortgages in 1989 had just a few months to benefit from rising house prices before the property market crashed.
According to the Nationwide house price index, house prices started falling in the last quarter of 1989.
Interest rates then rose to a peak of 15 per cent, and in the early 1990s recession unemployment reached 3m.
Home repossession peaked in 1991 when they reached 75,540, according to the Council of Mortgage Lenders. By 2003, that figure had fallen to just 7,830.
There has subsequently been a modest pick-up, but the CML has said it expects repossessions to "remain at historically low levels" - about 10,000 a year.
The Moody's report showed that the level of mortgage defaults and losses to lenders depended largely on the loan-to-value ratios used, determining how much of a deposit borrowers put down.
Mortgages taken out in 1989 with a loan-to-value ratio of more than 95 per cent showed losses to lenders of more than 9.5 per cent. For people borrowing less than 75 per cent of the value of the property that year, the loss has been less than 2 per cent.
Banks now use more sophisticated technology to model how many consumers might get into financial difficulty if the economy falters.
In the past four weeks British banks have reported strong growth in pre-tax profits. Mortgage defaults have hardly risen at all, but rising numbers of consumers struggle to repay unsecured loans and credit cards.
Separately Euristix, an information consultancy, estimated that more than £1.3bn of the total bad debt charge for the retail lending sector was related to fraud.
Martin Rowe, partner at Euristix, said last year saw an increased rise in incidences of fraud ranging from internal staff fraud to identity theft, where fraudsters steal data from customers.
He said financial crime had reached a 10-year high.
The Association for Payment Clearing Services, the industry body, said it be-lieved this figure was a "bit high". It said fraud involving credit and debit cards totalled £439.4m in 2005.
www.myvesta.org.uk
By Jane Croft
FT
A study by the agency of the mortgages taken out between 1985 and 2003 showed how home-buyers at the peak of the housing boom were much more likely to get into financial trouble.
Jonathan Livingstone, analyst and co-author of the report, said mortgages taken out between 1985 and 1987 were less than half as likely to fall into default as loans taken out between 1988 and 1990.
People who had taken out mortgages in 1989 had just a few months to benefit from rising house prices before the property market crashed.
According to the Nationwide house price index, house prices started falling in the last quarter of 1989.
Interest rates then rose to a peak of 15 per cent, and in the early 1990s recession unemployment reached 3m.
Home repossession peaked in 1991 when they reached 75,540, according to the Council of Mortgage Lenders. By 2003, that figure had fallen to just 7,830.
There has subsequently been a modest pick-up, but the CML has said it expects repossessions to "remain at historically low levels" - about 10,000 a year.
The Moody's report showed that the level of mortgage defaults and losses to lenders depended largely on the loan-to-value ratios used, determining how much of a deposit borrowers put down.
Mortgages taken out in 1989 with a loan-to-value ratio of more than 95 per cent showed losses to lenders of more than 9.5 per cent. For people borrowing less than 75 per cent of the value of the property that year, the loss has been less than 2 per cent.
Banks now use more sophisticated technology to model how many consumers might get into financial difficulty if the economy falters.
In the past four weeks British banks have reported strong growth in pre-tax profits. Mortgage defaults have hardly risen at all, but rising numbers of consumers struggle to repay unsecured loans and credit cards.
Separately Euristix, an information consultancy, estimated that more than £1.3bn of the total bad debt charge for the retail lending sector was related to fraud.
Martin Rowe, partner at Euristix, said last year saw an increased rise in incidences of fraud ranging from internal staff fraud to identity theft, where fraudsters steal data from customers.
He said financial crime had reached a 10-year high.
The Association for Payment Clearing Services, the industry body, said it be-lieved this figure was a "bit high". It said fraud involving credit and debit cards totalled £439.4m in 2005.
www.myvesta.org.uk
By Jane Croft
FT
posted by Your Friends @ Myvesta.org.uk at
3/09/2006 12:54:00 pm
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