Does Alistair Darling Want You To Be Repossessed?

Maybe the Government, along with the usual middle class do gooders at the Citizens Advice Bureau (CAB) and Shelter actually want you to be repossessed and lose your home?

Surely, that can’t be right?

Yet the Scottish newspaper the Sunday Herald Reports today the following:

“Prompted by concerns raised by Citizens Advice, Shelter and the Council of Mortgage Lenders, chancellor Alistair Darling announced last week that he has asked the Office of Fair Trading to investigate potential consumer detriment in the sale-and-leaseback market.

A spokeswoman for the Council of Mortgage Lenders said: “While we welcome the review, it is disappointing that no immediate action will be taken to regulate sale-and-leaseback schemes.

“Homeowners in difficulty may currently be considering selling their property through these schemes at a discounted value, without an independent valuation of their home, and with no real security of tenure.”

Whilst it is true that there are some rogue rent back traders out there (especially those offering to pay 100% of market value who in reality keep at least 40% back for many years), this Government is expert in knee jerk politics.

So many of the laws that have been passed since Labour came into power seem to be a reaction to scare stories in the tabloids.

The reality of the sell and rent back scenario is that it gives homeowners a last resort to keep their homes when all else has failed.

If the Government legislate against that last resort because a powerful lobby of middle class people feel that that they need to legislate against other people having the right to sell their homes for less than market value in order to stay in them, the outcome (like that of many of their policies) will be exactly the opposite.

CAB and Shelter may talk the talk but they won’t offer you a home when you are repossessed and evicted.

As for the CML (Council of Mortgage Lenders) – well who do you think supplies the financing and re-mortgaging for sell and rent back companies?

Is Alistair Darling (or any other of the wealthy Islington-ite Labour Government) going to provide you with a nice Council House or put you to the top of the housing list when you are repossessed?

I think we all know the answer to that one.

If you are thinking of selling and renting back make sure that you do the research and ask for references from other sellers when dealing with a rent back buyer.

The Return of Negative Equity as House Prices Fall Again?

The Council of Mortgage Lenders has said that according to the information collected from their members that this December shows a fall in house prices in real terms, unprecedented since the early 1990s.

This is further bad news for those facing repossession.

Negative Equity Graph

Not only are the rises in inter bank lending interest rates causing problems for those on sub prime mortgages and those trying to remortgage, but the drop in house prices and fall in sales also means that for many homeowners the equity left in their homes is shrinking for the first time in many years, and heading towards the dreaded negative equity last seen in the lat 1980s.

Negative equity can occur when the amount of money mortgaged against the property is greater than the value of the property.

For those on an 85% mortgage it means that house prices need to fall 15% to allow that to happen.

But for the tens of thousands on 95% mortgages, it means that if your house was worth £200,000 and your mortgage was £190,000, it only takes a relatively tiny fall of £10,000 in the market value to put you in the negative equity bracket.

If you then face problems paying your monthly mortgage you will literally have run out of equity to remortgage.

For those on 100% mortgages acquired in the last 12 months ANY fall in prices can mean instant negative equity.

David Cameron Asks Mortgage Lenders Not to Repossess

From BBC 11/12/2007

“Many experts are predicting that the housing market will slow
Home loans became even more expensive to re-pay in October because of higher interest rates and rising house prices, the Council of Mortgage Lenders said.

The CML said that interest repayments swallowed up 20.6% of first-time buyers’ monthly incomes.

That was up from 20.4% in September and the highest level since 1991.

Meanwhile, Conservative leader David Cameron will ask banks to do more to help householders avoid repossession when their fixed rate mortgages end.

Mr Cameron wants the industry to take a more sympathetic attitudes to borrowers who get into arrears, and to plan now to deal with an expected flood of home owners who might be facing repossession.  ”

Let’s hope that the banks take some notice of Mr Cameron.