Whilst the dust settles from a turbulent year within the property market, ever more data has come to our disposal to help us better understand the regional impact that 2020 had on the repossession property market. According to debt charity, StepChange, mortgage arrears is – jointly with council
tax – the biggest source of debt in households across the UK, at 31%. Whilst there are many resources that can provide guidance, help and comfort relative to personal financial circumstances, repossessions are still incredibly prevalent across the UK.
Homeowners whose properties have unfortunately been repossessed due to various financial struggles saw their properties be sold at market way below average asking prices, reaching in excess of 45% below market value.
Using government data to investigate areas across England and Wales, we have ranked property repossession hotspots, showing key data into the real below market value investment opportunities that repossessions can offer. This data can be seen below:
The concentration of repossessions is notably greater in the North of England, particularly the North West that traditionally has seen the highest levels of repossessions per 100,000 households in the UK.
Wales as a whole offered the greatest below market value discounts (49.7% below market value discount) on top of comparatively affordable regional property prices.
In contrast, many Southern regions in the UK have seen relatively low levels of repossessions, with the South West recording only 439 in 2020.
Despite affordability pressures created by the Covid-19 pandemic, mortgage arrears had not increased by the end of June 2020 and repossession activity was low. This is attributable to the provision of payment deferrals by mortgage lenders, and the FCA’s advice to lenders not to pursue repossessions.
Repossession figures still remain below the unprecedented levels seen during the global financial crisis and during the previous recession in the early 1990s, when they exceeded an astonishing 25,000 per quarter. Yet data shows that current rates are rising, with particular concentration in the North of England.
The slowing rates of repossessions across the UK can be attributed to a number of factors. A prominent reason has been a prolonged period of affordability in mortgage rates, allowing many new and existing homebuyers to maintain the steady monthly payments required of them to possess their homes.
However, whilst this does not remove the initial financial barrier of a mortgage deposit, the newfound ability for many to borrow at more favourable rates has seen many borrow money beyond their means, resulting in great risk of financial difficulty and defaulting down the line.
Repossessions as a result have remained at a seemingly consistent level and whilst this trend may continue in the short-term, a change in interest rates could see many borrowers forced into mortgage arrears. As the added financial pressures of Covid-19 come into action and the projected recession unfolds, many households will be pushed further to the edge of their financial capabilities, resulting in a repossession spike towards the close of 2021.
As such, the traditional hotspots for repossession are projected to show again, with the North of England leading the way.
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