The number of mortgages in arrears hit record lows in the third quarter of 2017 but repossessions ticked up, lenders say.
Data from the UK Finance trade body show that the number of mortgages in arrears of 2.5% or more of the outstanding balance fell to 88,300, the lowest level since the data was first recorded in 1994.
The number of mortgages in arrears fell across all bands, apart from those owing 10% or more, which edged up by 0.4% from 25,500 to 25,600,
However, the number of properties taken into possession in the third quarter nudged upwards for the first time since 2014 to 1,900, although it only took the number of repossessions back to the same total as in the first three months of this year.
Commenting on the figures, Jeremy Leaf, estate agent and a former RICS residential chairman, said: “These figures show on the one hand that low interest rates have helped keep arrears in check, but on the other, possessions edging up is evidence of increased lender confidence in selling properties owned by those in greatest debt.
“Looking forward, upward pressure on interest rates is likely to increase arrears as borrowers ‘on the margins’ always tend to be most vulnerable.”
Meanwhile, figures from Spicerhaart Corporate Sales show that the amount of time from taking a house into possession until its sale has reduced from 154 days to 115 over the past year.
Dave Miller, client account manager, said the firm now achieves an average of 110.50% of the asking price for all the properties taken into possession, up from 98.6% a year ago.
He said: “It is a myth that repossessed homes are sold off cheaply. Lenders, asset managers and corporate sales departments like ourselves have a duty of care to get the best possible price for a repossessed property.
“By ensuring that we engage with the prominent local estate agent to market and sell the property, we are able to take full advantage of the property market we currently have.”
You achieve an AVERAGE of 110% of the asking price? So basically you under value the properties that you take into possession for your lender clients? Not sure how that sits within the TCF framework…….
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Well known fact that Corporate Property Services / Lenders “valuations” are all based on various 90 /120 day RICS val formulas, so they (rics) value low as they don’t want the hassle of being questioned when an offer is submitted lower than their valuation. Lenders really don’t understand property, they are just focused on job security, stats, MI and worst off all “customer detriment”.What the repo figures / commentary will never state, is the “very significant” level of possession cases all stuck in the system as the biggest lenders have had to withdraw from proceeding (since around 2013) due to issues with their arrears calculations, which the courts ruled must be re calculated. These are not just arrears, but actually possession case, so at some point they will hit the figures and cause a substantial increase.
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I know how it works paulnewboy as I ran the repossession department of a large Asset Manager for a number of years. I know that the sales team there didn’t achieve anywhere near an average of 110% as to be fair to them they generally valued the properties correctly straight off. Although worryingly I can remember one of the largest lenders in the country telling our sales team that they didn’t care if the properties didn’t sell, as long as we were compliant whilst not selling them!
Re the error with calculation of arrears, it was down to them double charging on the arrears I believe and Northern Irish repossessions were hit the hardest at the time (this is where the first instance of it was discovered and challenged in court by the borrower), with very few taking place there for almost a year.
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@ Paul Newboy
Good morning Sir, I trust this response finds you well. You make some interesting points which are always welcome, but I would also like to add the following to your comments to clarify how corporate sales institutions like Spicerhaart operate. At the point that a company such as Spicerhaart are appointed to manage a repossession, we are instructed to follow a strict mandate as set by the lenders acting as mortgagees in possession. The mandate outlines what the procedure should be to process the property from beginning to end. It starts with our contractors attending the property to gain possession, clean & clear, drain water systems and generally prepare ready for market. The lenders ask us to provide valuations of the property but are very strict in terms of how and where the valuations are sourced. Firstly the lenders ask us to run Rightmove or similar internet based data on who are the most successful estate agents in the area. This is based on lots of factors such as amount of stock in the branch, withdrawal rate, exchange rates etc and although its not an exact science, it allows us to view who are the best performing agents in the immediate area of the subject property. Spicerhaart would then pick the top performing agent from the list and ask him to provide a selling agents appraisal figure of the property along with a suggested asking price. The second task is to obtain a RICS valuation of the property and the valuers are generally on the panel of the lender and are the large corporate RICS valuation companies such as E-surv / Allied /Countrywide and the like. The surveyors are asked to provide a valuation of the property on many different fronts such as on market value, value in current condition, value if condition was improved and of course a PMV figure which is the old forced sale valuation if sold within a given period of circa 90- 120 days. We then summarise all of the figures provided and recommend to the lender a proposed asking price to commence marketing. We then monitor the feedback from the market and suggest asking price reductions only where necessary and in an attempt to stimulate interest .In general all lenders will opt to test the market at the highest of the figures provided to demonstrate to the outgoing borrower that best practice was followed.
We are also happy to have an off-line informal discussion with you about the above topic if you wish to do so. None of us are the bad guys you know, we only want what is best for the customer and his property !
mark.rothwell@spicerhaart.co.uk
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Thanks Mark. But I’ll politely decline. I am on par with gk1uj2001, and wrote the processes and SLA’s for about 20 lenders over the past 20+ years, so don’t worry I know how it works, it just amazes me how lenders have changed in the years from property people to process people, throwing buzz words about such as “detriment” and “vulnerability”….
Please don’t get me started on how you select agents!!!! asset managers can hide behind stats and best agent reports all they want, but I know of 4 “large” AM’s who either have a “paid for postcode panel” or other reciprocal arrangements.
Largely you cannot chose the real “best agent” to sell a repossession, as the real “best agents” don’t want to work on multi agency for a fee that may look reasonable, but saddled with weekly inspections, public notices, copies of every screen shot that shines and the risk of a borrower popping in to say high, really isn’t that attractive, so guess what, the “stats” then get diluted into the AM’s own office networks (no names mentioned) or some undisclosed “partner” arrangement.
I could go on and on and on…..
Best of luck though, it’s a really rewarding industry to be in?
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@ Paulnewboy26
Thank-you for your reply Paul and you certainly have some valid points which I will endeavour to answer. Firstly you are quite correct that Lenders have expanded their focus over recent years and the spotlight has moved slightly to the left from actual prices achieved to also incorporate matters such as customer detriment / vulnerability and in general, the customers experience and journey.
In terms of selecting agents though, it may just be that you have dealt with other asset managers within the industry but we aren’t all the same. I can categorically promise you that Spicerhaart do run data on all agents to ultimately provide us with a list of suitable agents in the area based on specific criteria. As I stated before, its not an exact science but it provides us with a list of agents to approach. Once we have the list we always approach agent number one on the list and 9 times out of 10 they agree to act for us. We don’t have a panel, we don’t charge agents to receive instructions, we don’t have reciprocal arrangements and we pay a fair fee that they can decline if its not for them. We do use multi agency but only when the original agent isn’t performing and hasn’t located a buyer within an initial period. At the risk of also pre-empting your next question around the amount of instructions we pass back to our own network, the answer is very few for many different reasons such as outlined above. The offer to discuss off line is still on offer and we are open to inspection or analysis as we have nothing to hide. As for being a rewarding industry to be in, well, it would be true to say it wasn’t what I dreamed off as a school boy. However, having been in the business with most of the UK lenders and asset mangers for the last 25 + years, I am just getting the hang of it and the reward is doing the right thing for the outgoing customer that could one day be any of us. Keep well.
mark.rothwell@spicerhaart.co.uk
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