Repossessed

It seems that it is always bad news these days when it comes to economics and finance. The turmoil in the global financial markets, the current credit crunch, lower house prices and a housing market that is threatening to grind to a halt - it's all doom and gloom.

The only silver lining to this dark cloud has been the Bank of England's announcement almost two weeks ago, that it was to cut interests rates down to 5.5 per cent - the first cut in two years.

This news was met with smiles and sighs of relief by mortgage holders around the country as it means lower monthly mortgage payments and cheaper borrowing costs.

But these smiles are about to be quickly wiped off optimistic faces, as it has been forecasted by a leading property trade body, that home repossessions are likely to leap by more than half next year to 45,000, which is more than seven times the number of homes which were seized in 2004.

The Royal Institution of Chartered Surveyors (Rics) also predicted that we may continue to see house price falls early next year, though it believes property values will end in 2008 at a similar level to present figures.

The total number of homes that will be repossessed this year is likely to be close to the 30,000 mark. If the number rises to 45,000 next year, this would be the equivalent of 123 people losing their homes every day. This shocking figure is a dramatic rise on the 6,030 homes that were seized back in 2004.

Never mind the news of lower house prices, some people may not have any homes at all. These are very demoralising statistics in the run up to Christmas. Brits have experienced a particularly tough time in the past few months, which has been made worse by the credit crunch.

The news that nearly 45,000 homes will be repossesed next year is a further barometer of the awful economic conditions that we are currently knee-deep in.

And first-time buyers are likely to be discouraged from getting on to the property ladder altogther if having their homes repossessed is a very real possibility.

Although commentators including Rics believe there is a strong demand from first-time buyers who are waiting in the wings and ready to pounce if property prices soften.

According to Rics, the buy-to-let sector could slow but at the moment, although there is little evidence of widespread selling of investment properties.

The rise of home repossessions has been partly blamed on the fact that well over one million short-term fixed-rate mortgage deals will expire in 2008 and some of these borrowers will find themselves paying a great deal more each month.

This month, the Financial Services Authority warned mortgage lenders to brace themselves for the credit crisis to get even worse than it is already and urged them not to hurry to repossess the homes of customers who get into serious financial hardship.

Hopefully, the Bank of England will preempt this surge in home repossessions and make another rate cut in the New Year, which will help alleviate the burden of costly monthly mortgage payments.