At the depth of the property market crash in the early 1990s the number of repossessions peaked at over 70,000 per year, the good news for the current property market crash is that repossessions seems to be much less.

Data recently published by the FSA reported that the quarterly rate of repossessions is falling, the most recent figure was 13,610, a fall of 1,274 on the previous quarter.  Taking this on an annualised basis it would suggest that the total repossessions for 2009 are likely to be less than 60,000, well down on the 1990s property market crash.

The reported fall in repossessions is down to two key factors.  Firstly the banks and lenders have been under pressure to repossess as a last resort, to give every chance for the borrower to resolve their financial predicament.  Secondly, mortgage interest rates have been historically low, thus giving a lifeline to those who would otherwise have been unable to manage their payments at “normal” mortgage rates.

Overall this is great news, less repossessions means less disruption to the lives of families across the UK.  However going forward into 2010 and 2011 we probably still experience a significantly high number of repossessions, this is due to a combination of factors.  Firstly unemployment is rising and will peak in 2010, but due to the need for cutting public spending the rate of decline in unemployment is likely to be slow, thus making repossessions for many more likely.  Secondly the mortgage interest rates will start to rise from 2010 and gradually move back toward the “normal” rates where mortgage interest of 5% or 6% is typical.  For many the increase in mortgage rates will seem painful and difficult to manage after they have become used to the lower rates.

Our view of a protracted and significantly high number of repossessions over a number of years will have an impact on property prices, whilst these will increase over the next few years the gains are unlikely to be spectacular whilst many are still being repossessed.